Washington Life Producer Practice Exam

Which life insurance policy can change its premium and death benefit amount?

1. Term life insurance

2. Universal life insurance

3. Whole life insurance

4. Variable life insurance

The correct answer is: Universal life insurance

Universal life insurance is designed with flexibility in mind, allowing policyholders to adjust both the premium payments and the death benefit amount. This type of policy has an unbundled structure, which means the cost of insurance, any additional fees, and the cash value component are tracked separately. As the cash value of a universal life policy grows, the policyholder can use this growth to pay premiums or withdraw funds. Additionally, if a policyholder's financial situation changes, they can increase or decrease their premium payments or adjust the death benefit, subject to certain guidelines. This adaptability makes universal life insurance attractive for those seeking a dynamic approach to their life insurance needs, allowing individuals to respond to changing circumstances over time. In contrast, term life insurance typically provides a fixed death benefit with consistent premiums for a specific term and does not allow alterations in benefits or premiums during that period. Whole life insurance offers fixed premiums and a guaranteed death benefit, while variable life insurance allows changes in death benefits and premiums but is primarily tied to investment performance rather than flexible adjustments by the policyholder.