What might influence the cash value growth in a variable life insurance policy?

What might influence the cash value growth in a variable life insurance policy?

• A. Fixed interest rate set by the insurer
• B. Inflation rate in the economy
• C. Choice of investments selected by the policyholder
• D. Annual cost of living adjustments

Answer: (C)

In a variable life insurance policy, the cash value growth is directly influenced by the choice of investments selected by the policyholder. This type of policy allows the policyholder to allocate the cash value among various investment options, often including stocks, bonds, or mutual funds. As the investment choices perform, they will affect the cash value growth positively or negatively. The performance of these selected investments can lead to significant fluctuations in the cash value, depending on market conditions. If the chosen investments perform well, the cash value can increase substantially, whereas poor investment performance can lead to a decrease in cash value. This characteristic distinguishes variable life insurance from other types of policies that may offer guaranteed or more stable cash value growth. In contrast, other options such as a fixed interest rate or costs of living adjustments do not apply to variable life insurance in the same way, as they typically pertain to other types of insurance products or financial considerations that do not directly impact the performance of the investments chosen by the policyholder. Inflation can affect the purchasing power of the cash value but does not directly influence its growth like the investment choices do.

In a variable life insurance policy, the cash value growth is directly influenced by the choice of investments selected by the policyholder. This type of policy allows the policyholder to allocate the cash value among various investment options, often including stocks, bonds, or mutual funds. As the investment choices perform, they will affect the cash value growth positively or negatively.

The performance of these selected investments can lead to significant fluctuations in the cash value, depending on market conditions. If the chosen investments perform well, the cash value can increase substantially, whereas poor investment performance can lead to a decrease in cash value. This characteristic distinguishes variable life insurance from other types of policies that may offer guaranteed or more stable cash value growth.

In contrast, other options such as a fixed interest rate or costs of living adjustments do not apply to variable life insurance in the same way, as they typically pertain to other types of insurance products or financial considerations that do not directly impact the performance of the investments chosen by the policyholder. Inflation can affect the purchasing power of the cash value but does not directly influence its growth like the investment choices do.