PSI Life Exam Practice Test

What is a characteristic of Universal Life insurance?

1. It often has fixed premiums and limited flexibility

2. It allows policyholders to adjust premiums and coverage

3. It has no cash value accumulation

4. It is only available for a limited term

The correct answer is: It allows policyholders to adjust premiums and coverage

Universal Life insurance is characterized by its flexibility, particularly in terms of adjusting premiums and coverage. This type of policy allows policyholders to vary the amount of premium payments they make and to adjust the death benefit within certain limits. This flexibility is one of the key features that distinguishes Universal Life from other types of life insurance, such as whole life or term policies, which typically have fixed premiums and benefits. The ability to modify premiums means that policyholders can adapt their coverage according to their financial situation over time, making Universal Life a versatile option for those whose needs may change. This adaptability is advantageous for individuals looking for a life insurance solution that can be personalized throughout their lifetime. In contrast, options that suggest fixed premiums and limited flexibility or indicate the absence of cash value accumulation do not accurately describe Universal Life insurance. Additionally, the notion that Universal Life is available only for a limited term misrepresents the nature of the product, as Universal Life policies are designed to provide lifelong coverage as long as the premiums are maintained.