Massachusetts Life Producer Practice Exam

Which of the following is typically a component of a universal life insurance policy?

1. Fixed premium payments

2. Flexible premium payments

3. Guaranteed death benefits only

4. Investments in stocks and bonds

The correct answer is: Flexible premium payments

Universal life insurance is designed to offer flexibility in premium payments, which is a hallmark feature of this type of policy. Policyholders have the option to adjust the amount and frequency of their premium payments within certain limits. This flexibility allows them to increase or decrease their contributions based on their financial situation, making universal life insurance adaptable to changing needs. Unlike whole life insurance, which typically requires fixed premium payments, universal life gives policyholders the ability to manage their cash value and death benefit more dynamically. This characteristic encourages policyholders to take an active role in their policy management, aligning the insurance with their financial goals. The other options do not accurately represent the essential features of a universal life insurance policy. Fixed premium payments are characteristic of whole life policies, guaranteed death benefits without additional options are not a unique aspect of a universal life policy, and while universal life insurance may have an investment component, they do not specifically invest in stocks and bonds like variable policies do. Instead, the cash value can grow based on credited interest rates set by the insurer.