West Virginia State Life Insurance Practice Exam

Which of the following is an element of a Variable Life policy?

1. Adjustable premiums

2. A fixed, level premium

3. Universal benefits

4. Guaranteed cash value

The correct answer is: A fixed, level premium

A Variable Life insurance policy is characterized by its flexible premiums and potential for cash value that fluctuates based on the performance of underlying investments. The essential element of a Variable Life policy is that the premium can be adjusted within specified limits, allowing policyholders to pay more or less depending on their financial situation. While a fixed, level premium is a staple of whole life or term life policies, it does not accurately reflect the nature of Variable Life policies. Instead, Variable Life policies provide a mix of life insurance and investment, where policyholders can choose investment options that may impact the policy’s cash value and death benefit. The other options, like adjustable premiums or universal benefits, could apply to other types of life insurance rather than being specific elements unique to the structure of a Variable Life policy. Guaranteed cash value is also not a defining characteristic of Variable Life insurance, as the cash value in this type varies and is not guaranteed. Understanding these features helps differentiate between various life insurance products and their underlying principles.