Oklahoma Life Producer Practice Exam

What distinguishes a Universal Life policy from a Whole Life policy?

1. Universal Life has fixed premiums

2. Universal Life offers flexible premiums

3. Whole Life offers cash value

4. Whole Life is term-based

The correct answer is: Universal Life offers flexible premiums

A Universal Life policy is distinguished by its flexible premium structure, allowing policyholders to adjust the amount and frequency of their premium payments within certain limits. This flexibility can reflect changes in the policyholder's financial situation and insurance needs, making it different from a Whole Life policy, which typically has consistent and fixed premiums throughout the policy's life. In Universal Life insurance, the policyholder can choose to pay more than the minimum premium required, thus increasing the policy's cash value or reducing the premium payments in times of financial strain. This adaptability is a key feature that appeals to many individuals looking for life insurance that can grow and adjust with their changing circumstances. Whole Life policies, on the other hand, are designed with fixed premiums that do not change over time. They also accumulate cash value at a guaranteed rate, but the premium payment is consistent, contrasting with the variable nature of Universal Life premiums. Understanding these distinctions helps policyholders select a life insurance policy that best fits their financial planning needs and preferences.