West Virginia State Life Insurance Practice Exam

Which of the following is NOT a characteristic of an Adjustable Life policy?

1. Premiums can be adjusted periodically

2. Face amount can be adjusted using policy dividends

3. Cash value can grow based on investment performance

4. Insured can modify their death benefit amount

The correct answer is: Face amount can be adjusted using policy dividends

An Adjustable Life policy is designed to offer flexibility in various aspects of the policy structure. One of its key features is that policyholders have the ability to periodically adjust their premiums and death benefits according to their changing needs. This means that the insured can modify both the premium payments and the death benefit amount, making these options characteristic of the policy. The aspect mentioned in the chosen answer refers to the face amount being adjusted using policy dividends. However, in Adjustable Life policies, dividends are typically not a mechanism through which the face amount is adjusted. Instead, dividends may be utilized to pay premiums or accumulate in the cash value component. This contrasts with whole life policies, where dividends can indeed affect the policy's face amount. Thus, the idea that the face amount of an Adjustable Life policy can be adjusted directly through dividends does not accurately reflect how these policies operate. Cash value growth and the capability of the insured to modify the death benefit are also well-established characteristics of an Adjustable Life policy. The cash value in such policies can grow based on the premiums paid and interest, rather than on investment performance like variable life or universal life products. Therefore, the choice that misrepresents the nature of Adjustable Life policies is the claim that the face amount can be adjusted using policy