Oklahoma Life Producer Practice Exam

What type of life insurance policy has a cash value linked to an equity index?

1. Whole life insurance

2. Term life insurance

3. Universal life insurance

4. Indexed universal life insurance

The correct answer is: Indexed universal life insurance

Indexed universal life insurance is the correct choice because this type of policy combines aspects of both universal life insurance and an equity index. The cash value of an indexed universal life insurance policy is linked to a specific stock market index, such as the S&P 500. This allows policyholders to benefit from potential market gains while providing some level of protection against market losses, typically through a guaranteed minimum interest rate. In addition to the potential for cash value growth based on market performance, indexed universal life insurance also offers flexible premium payments and death benefits, making it an attractive option for individuals looking to balance life insurance coverage with an investment component. This connection to an equity index distinguishes it from other life insurance products that either do not accumulate cash value or have a different structure for growth, such as whole life or universal life insurance without an indexed feature.