West Virginia State Life Insurance Practice Exam

Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

1. Whole life insurance

2. Term life insurance

3. Universal life insurance

4. Variable universal life

The correct answer is: Variable universal life

The type of life policy that contains a monthly mortality charge and allows for self-directed investment choices is variable universal life insurance. This product provides policyholders with the flexibility to choose how their cash value is invested, typically in a variety of investment options such as mutual fund-like accounts. This differentiates it from other types of policies. In variable universal life insurance, the monthly mortality charge covers the cost of insurance protection, while the cash value can fluctuate based on the performance of the investments chosen by the policyholder. This combination of features allows policyholders to potentially increase their cash value and death benefit based on the performance of their selected investments. Whole life insurance typically offers a fixed premium, guaranteed cash value growth, and does not provide options for investment choices or market fluctuations. Term life insurance is focused solely on providing a death benefit for a specified term with no savings or investment component. Universal life insurance does allow for investment choices and flexible premiums, but it tends to offer a fixed interest rate for its cash value rather than a variable investment strategy.