Which policy type is described as occurring with a yearly required amount to keep the policy in force and can vary?

Which policy type is described as occurring with a yearly required amount to keep the policy in force and can vary?

• A. Term life
• B. Limited payment
• C. Universal life
• D. Whole life

Answer: (C)

Universal life uses flexible premium payments with a cash value that earns interest. A yearly minimum premium must be paid to keep the policy in force, and that amount can vary from year to year because it depends on the policy’s cash value, the credited interest, and the cost of insurance. If the cash value grows or interest credits are strong, the required minimum can be lower; if costs rise or the value declines, the minimum can increase. This flexibility sets it apart from term life (premiums stay fixed for a set term), whole life (premiums are fixed for the life of the policy), and limited-pay policies (premiums are paid for a finite period).

Universal life uses flexible premium payments with a cash value that earns interest. A yearly minimum premium must be paid to keep the policy in force, and that amount can vary from year to year because it depends on the policy’s cash value, the credited interest, and the cost of insurance. If the cash value grows or interest credits are strong, the required minimum can be lower; if costs rise or the value declines, the minimum can increase. This flexibility sets it apart from term life (premiums stay fixed for a set term), whole life (premiums are fixed for the life of the policy), and limited-pay policies (premiums are paid for a finite period).