Massachusetts Life Producer Practice Exam

Which of the following statements about universal life insurance is NOT true?

1. Universal life insurance normally has a minimum guaranteed cash value for duration for the policy.

2. Cash value accumulations have guaranteed minimum interest rate.

3. Premiums can fluctuate based on market conditions.

4. Death benefit can be adjusted by the policyholder.

The correct answer is: Premiums can fluctuate based on market conditions.

In the context of universal life insurance, the statement regarding fluctuating premiums based on market conditions is not accurate. Universal life insurance is designed with flexible premium payments, allowing policyholders to adjust the amount and timing of their contributions. However, these adjustments are not directly influenced by market conditions; they are rather determined by the insurance provider’s terms and the policyholder's needs. The other statements accurately describe the characteristics of universal life insurance. The policy does often feature a minimum guaranteed cash value, which ensures that as long as the premiums are paid, some value accumulates over time. Additionally, cash value accumulations typically come with a guaranteed minimum interest rate, providing security against loss in value. Furthermore, one of the appealing aspects of universal life insurance is the ability for the policyholder to adjust the death benefit, offering even greater flexibility in managing the policy according to changes in personal circumstances or financial goals.