South Carolina Life Insurance Practice Exam

Which of the following is NOT a feature of universal life insurance?

1. Flexible premiums

2. Adjustable death benefits

3. Fixed cash value

4. Option for partial withdrawals

The correct answer is: Fixed cash value

Universal life insurance is designed to offer flexibility and adaptability to policyholders, which is reflected in its primary features. One key characteristic is the ability to adjust premiums, allowing policyholders to make higher or lower payments according to their financial situation. This flexibility enables them to manage their cash flow more effectively over time. Another feature is the adjustable nature of death benefits. Policyholders can modify the amount of coverage they need, which can accommodate changes in circumstances such as marriage, having children, or changes in financial obligations. This adaptability ensures that the policy remains suitable throughout various life stages. Furthermore, universal life insurance often allows for partial withdrawals from the cash value. This enables policyholders to access funds without surrendering the policy, making it a valuable option for those who might need liquidity for unexpected expenses. In contrast, the presence of a fixed cash value is not aligned with the intrinsic structure of universal life insurance. Unlike whole life insurance, which has a guaranteed, predetermined cash value that accumulates at a consistent rate, universal life policies typically have a cash value that can fluctuate based on the interest credited to the cash account. Thus, flexibility in cash value accumulation is part of universal life, making the concept of a fixed cash value inconsistent with this type of insurance. This