Oklahoma Life Producer Practice Exam

What is the primary benefit of Indexed Universal Life insurance policies?

1. Guaranteed loan options

2. Cash value accumulation tied to stock market performance

3. Fixed interest rates on savings

4. Lower premiums compared to traditional policies

The correct answer is: Cash value accumulation tied to stock market performance

Indexed Universal Life (IUL) insurance policies are designed to provide policyholders with the potential for cash value growth that is tied to the performance of a specific stock market index, such as the S&P 500. This structure allows policyholders to benefit from market gains while still offering a level of protection against losses, as these policies typically have a floor that limits losses. The primary appeal of indexed universal life insurance lies in its ability to provide a hybrid approach to whole life insurance. Unlike traditional whole life policies, which offer fixed cash value growth, an IUL allows for potentially higher returns due to its linkage with stock market indices, making it an attractive option for individuals looking to build cash value over time while also enjoying the inherent protection of a life insurance policy. Policyholders do not directly invest in the stock market; instead, the cash value grows based on the performance of the index, and any interest credited is typically subject to a cap, providing a balance between risk and reward. This contrasts with options that focus solely on guaranteed loan provisions, fixed interest rates, or lower premiums, which do not capture the unique growth potential associated with indexed universal life insurance.