Minnesota Life Insurance License Practice Exam

An insured wants to purchase a policy with three key elements: flexible premium, death benefit, and the choice of how the cash value accumulates. Which policy would fit the needs?

1. Whole life insurance

2. Term life insurance

3. Universal life insurance

4. Variable universal life insurance

The correct answer is: Variable universal life insurance

The policy that best fits the requirements of having a flexible premium, death benefit, and choice of how cash value accumulates is variable universal life insurance. This type of insurance combines features of both whole life and universal life insurance. With variable universal life insurance, policyholders enjoy flexibility in their premium payments, allowing them to adjust how much they pay into the policy and when. This aligns with the need for a flexible premium. Additionally, this policy offers a death benefit that can be adjusted, providing the insured the choice to increase or decrease the death benefit amount based on their financial circumstances. Moreover, one of the defining features of variable universal life insurance is that it allows the policyholder to allocate the cash value among a variety of investment options, such as stocks, bonds, or mutual funds. This gives the insured the ability to choose how their cash value will accumulate, depending on their risk tolerance and investment preferences. Whole life insurance does not provide the same level of flexibility in premium payments and investment choices. While it does accumulate cash value, the growth is typically guaranteed and conservative. Term life insurance, on the other hand, is purely protection-based and does not offer any cash value accumulation. Universal life insurance does allow for flexible premiums and cash value accumulation, but