Texas Life Agent Practice Exam

If a client wants cash value life insurance with a flexible premium and an adjustable death benefit that allows the policy owner various cash value investment options, which type of policy should they buy?

1. Whole life

2. Term life

3. Variable/Universal Life

4. Endowment policy

The correct answer is: Variable/Universal Life

The correct choice is indeed a policy that offers cash value, flexible premiums, adjustable death benefits, and various cash value investment options. This describes a Variable Universal Life policy. Variable Universal Life insurance merges features of both whole life and universal life insurance. It allows the policyholder not only to adjust their premium payments and death benefit but also to allocate the cash value into various investment options, such as stocks and bonds, reflecting the policy's variable nature. This structure is particularly appealing for clients who seek both flexibility and the potential for growth in their cash value through market investments, making it a suitable choice for those looking to manage their life insurance with an investment focus. Other types of policies do not offer this combination of features. Whole life insurance provides fixed premiums and a guaranteed death benefit, lacking the adjustable elements the client desires. Term life insurance is solely focused on providing a death benefit for a specified period without any cash value accumulation. An endowment policy pays out a lump sum after a specified term or upon the death of the insured; however, it also does not provide the flexibility and investment options that a Variable Universal Life policy does. Thus, Variable Universal Life is the most suitable choice for the client's needs.