AD Banker Comprehensive Practice Exam

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Enhance your exam readiness with the AD Banker Comprehensive Exam guide. Includes flashcards and multiple-choice questions with explanations.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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What is a key characteristic of a universal life insurance policy?

Fixed premiums with no flexibility
Flexible premiums with variable cash value
Guaranteed death benefit with no cash value
Designed for short-term insurance needs

The correct answer is: Flexible premiums with variable cash value

A universal life insurance policy is defined primarily by its flexibility in both premium payments and the cash value component. This type of policy allows the policyholder to adjust the amount and frequency of premium payments, which means they can contribute more during years of higher income and less during times of financial strain. This ability to vary premiums adds a layer of adaptability that is not found in traditional whole life insurance, which typically has fixed premiums. In addition to flexible premium payments, universal life insurance has a cash value component that can fluctuate based on market performance and interest rates. This cash value can increase over time and can be borrowed against or used to pay premiums, giving policyholders more control over their policy compared to others that may offer fixed benefits and structures. The other choices describe characteristics that do not apply to universal life insurance. Fixed premiums with no flexibility would relate more closely to whole life policies. A guaranteed death benefit with no cash value aligns with term insurance. Lastly, being designed for short-term insurance needs is descriptive of term policies rather than universal life, which is intended for longer-term financial planning.