PSI Life Exam Practice Test

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What does a variable contract aim to provide?

Fixed benefits
Benefits that may change according to investment performance
Guaranteed returns
Immediate cash value

The correct answer is: Benefits that may change according to investment performance

A variable contract aims to provide benefits that may change according to investment performance. This type of contract allows policyholders to allocate their premiums among a variety of investment options, such as stocks, bonds, or mutual funds. As the performance of these investments fluctuates, the value of the benefits offered by the variable contract also changes. This feature enables the policyholder to potentially achieve higher returns over time, in contrast to fixed benefit contracts where the payouts are predetermined and do not change based on market conditions. Consequently, the variable nature of the contract makes it appealing for those who are willing to accept investment risk in pursuit of greater financial growth.