PSI Life Exam Practice Test

Which policy combines universal life features with investment choices?

1. Term life policy

2. Whole life policy

3. Variable universal life policy

4. Standard insurance policy

The correct answer is: Variable universal life policy

A variable universal life policy effectively merges the flexible premium structure and death benefit options of universal life insurance with a variety of investment choices. This type of policy allows the policyholder to choose how the cash value is invested among various investment accounts, which can include stocks, bonds, or mutual funds. This means that the policyholder can potentially benefit from market performance, making it different from traditional universal life policies which typically have a fixed interest rate for cash value growth. Additionally, like universal life insurance, variable universal life policies offer the flexibility to adjust premium payments and death benefits. This combination gives policyholders the advantage of both insurance protection and the opportunity for investment growth, aligning with varying risk tolerances and financial goals. In contrast, term life policies provide pure life coverage for a fixed period without any cash value component or investment features. Whole life policies offer guaranteed death benefits and fixed premiums but do not have the same level of investment flexibility as variable universal life policies. Standard insurance policy is a vague term and does not specifically refer to any type of life insurance that combines investment options.