South Carolina Life Insurance Practice Exam

Which type of life insurance provides permanent protection?

1. Term Life Policy

2. Variable Life Insurance

3. Group Life Insurance

4. Universal Life Insurance

The correct answer is: Variable Life Insurance

Variable Life Insurance provides permanent protection because it is designed to last for the insured's entire life, as long as the premiums are paid. This type of policy not only offers a death benefit but also features a cash value component, which can be invested in various investment options chosen by the policyholder. The cash value grows based on the performance of these investments, offering the potential for greater gains compared to traditional whole life policies, but with added risk since the investment performance can fluctuate. In contrast, term life policies offer protection for a specific term or period, such as 10, 20, or 30 years, and do not accumulate any cash value. Group life insurance typically provides only temporary coverage, often linked to employment, which ceases when the employment ends. Universal life insurance does provide permanent protection similar to variable life but is characterized by its flexible premium payments and adjustable death benefits. However, the investment component is not as dynamic as in variable life insurance. Therefore, variable life insurance stands out as a permanent protection option due to its lifelong coverage and investment features.