Tennessee Insurance Practice Exam

Which type of life insurance allows the policy owner to have level premiums and choose from a variety of investment options?

1. Whole Life

2. Variable Life

3. Term Life

4. Universal Life

The correct answer is: Variable Life

Variable Life insurance is designed to provide the policy owner with both a death benefit and a cash value component that can be invested in a variety of options, such as stocks, bonds, or mutual funds. This flexibility in investment choices allows policyholders to tailor their insurance to their financial goals and risk tolerance. Additionally, the premiums in Variable Life are generally level, providing predictability in costs over time. The investment component not only impacts the cash value accumulation based on the performance of the chosen options, but it also affects the overall death benefit. Therefore, policyholders can see their benefits grow depending on their investment choices, aligning with their personal financial strategy. In contrast, Whole Life insurance typically offers a fixed premium and guaranteed cash value growth, without the variable investment options. Term Life is focused solely on providing coverage for a specific time period, with no cash value or investment components. Universal Life offers flexible premiums and benefits, but like Whole Life, it does not provide the investment variety that is characteristic of Variable Life insurance.