Oklahoma Life Producer Practice Exam

A policy where the death benefit does not decline but the cash value may fluctuate due to market conditions is known as?

1. Whole Life Insurance

2. Universal Life Insurance

3. Term Life Insurance

4. Variable Life Insurance

The correct answer is: Universal Life Insurance

The policy in question is one where the death benefit remains consistent while the cash value can vary based on market performance. This characteristic is a defining feature of universal life insurance. Universal life provides flexibility in premium payments and allows the cash value to earn interest at a rate determined by the insurer, which may include an index or reference to market conditions. In contrast, whole life insurance typically offers a guaranteed death benefit and cash value accumulation that grows at a fixed rate, thus not subject to market fluctuations. Term life insurance does not have a cash value component at all, as it strictly covers the death benefit for a specified term. Variable life insurance permits policyholders to invest their cash value in various investment options, which can lead to significant fluctuations in both cash value and death benefit, depending on the performance of those investments. So, in essence, universal life insurance uniquely combines a steady death benefit with a cash value that may fluctuate, making it the correct answer to the question.