Which term describes a life insurance policy where the cash value accumulates based upon a specific portfolio of stocks and does not guarantee performance?

Which term describes a life insurance policy where the cash value accumulates based upon a specific portfolio of stocks and does not guarantee performance?

• A. Fixed life insurance
• B. Group life insurance
• C. Variable life insurance
• D. Solicitation of insurance

Answer: (C)

This question tests understanding of how cash value grows in different life insurance policy types and where investment risk lies. In a variable life policy, the cash value is allocated to separate investment accounts that typically invest in a portfolio of stocks. Because these investments are market-based, there is no guarantee on the cash value’s performance—the value can go up or down depending on how the investments perform. This contrasts with fixed life insurance, which credits a guaranteed interest rate to the cash value; group life insurance, usually employer-provided and often term, isn’t tied to a stock portfolio; and solicitation of insurance isn’t a policy type at all. So the description—cash value accumulating based on a specific stock portfolio with no guaranteed performance—fits variable life insurance.

This question tests understanding of how cash value grows in different life insurance policy types and where investment risk lies. In a variable life policy, the cash value is allocated to separate investment accounts that typically invest in a portfolio of stocks. Because these investments are market-based, there is no guarantee on the cash value’s performance—the value can go up or down depending on how the investments perform. This contrasts with fixed life insurance, which credits a guaranteed interest rate to the cash value; group life insurance, usually employer-provided and often term, isn’t tied to a stock portfolio; and solicitation of insurance isn’t a policy type at all.

So the description—cash value accumulating based on a specific stock portfolio with no guaranteed performance—fits variable life insurance.