Rhode Island Life Insurance Practice Exam

Which life policy type includes self-directed investment choices?

1. Traditional Whole Life

2. Term Life Insurance

3. Variable Universal Life

4. Universal Life Insurance

The correct answer is: Variable Universal Life

Variable universal life insurance is designed to allow policyholders to have significant control over their cash value investments. This type of policy combines the flexibility of universal life insurance—with its adjustable premiums and death benefits—along with the investment opportunities typically found in variable policies. Policyholders can choose from a variety of investment options, such as mutual funds, stocks, and bonds, thereby directly influencing their cash value and potential growth based on market performance. This self-directed investment capability distinguishes variable universal life insurance from traditional whole life and term life insurance, where investment choices are limited or not present at all. Universal life insurance, while offering some flexibility, does not provide the same level of self-directed investment options as variable universal life. Thus, choosing variable universal life insurance allows for more proactive financial strategies, appealing to those who wish to play an active role in their life insurance policy's performance.