Which statement best describes a universal life insurance policy?

Which statement best describes a universal life insurance policy?

• A. A policy with fixed premiums and benefits
• B. A type of temporary insurance for a set term
• C. A permanent insurance with flexible premiums and adjustable benefits
• D. A policy that does not accumulate cash value

Answer: (C)

A universal life insurance policy is designed with flexibility in mind, which is a key characteristic that distinguishes it from other types of life insurance. This type of policy allows policyholders to adjust their premium payments and death benefits according to their financial needs and circumstances. The flexibility of premium payments means that policyholders can choose to pay more than the minimum required premium if they wish to increase the cash value component of the policy. Conversely, they can pay less if needed, as long as they remain above the minimum premium needed to keep the policy in force. Additionally, the adjustable benefit feature allows policyholders to modify the death benefit amount, which provides a tailored approach to life insurance coverage. This adaptability makes universal life insurance particularly appealing for individuals whose financial situations may change over time, as it can evolve to meet their needs without the requirement of a new policy. Understanding these features helps to clarify why this option is the best description of a universal life insurance policy. Other types of policies, such as those with fixed benefits or term policies, do not offer the same level of flexibility or long-term savings potential that universal life insurance provides.

A universal life insurance policy is designed with flexibility in mind, which is a key characteristic that distinguishes it from other types of life insurance. This type of policy allows policyholders to adjust their premium payments and death benefits according to their financial needs and circumstances.

The flexibility of premium payments means that policyholders can choose to pay more than the minimum required premium if they wish to increase the cash value component of the policy. Conversely, they can pay less if needed, as long as they remain above the minimum premium needed to keep the policy in force.

Additionally, the adjustable benefit feature allows policyholders to modify the death benefit amount, which provides a tailored approach to life insurance coverage. This adaptability makes universal life insurance particularly appealing for individuals whose financial situations may change over time, as it can evolve to meet their needs without the requirement of a new policy.

Understanding these features helps to clarify why this option is the best description of a universal life insurance policy. Other types of policies, such as those with fixed benefits or term policies, do not offer the same level of flexibility or long-term savings potential that universal life insurance provides.