Oklahoma Life Producer Practice Exam

A Separate Account is a feature of which type of Life insurance policy?

1. Universal Life

2. Term Life

3. Variable Whole

4. Whole Life

The correct answer is: Variable Whole

A Separate Account is a distinctive feature of Variable Whole Life insurance policies. These accounts are set up to hold the investment component of the premiums paid, which is used to allocate funds into various investment options, such as stocks and bonds. This investment aspect allows policyholders to potentially grow their cash value based on the performance of these investments, rather than relying solely on a guaranteed interest rate, as seen in other types of life insurance products. In Variable Whole Life insurance, the policyholder has control over how their cash value is invested, which introduces more risk but also the potential for higher returns. This flexibility is a hallmark of variable policies and distinguishes them from others like Whole Life and Term Life, which do not have this investment feature and are typically more rigid in their structure and benefits. Universal Life also allows for some flexibility and investment options, but it does not involve separate accounts in the same way that Variable Whole Life does.