Pennsylvania Life and Health Insurance Exam Practice Question
The type of policy where 80% to 90% of the premium is placed in traditional fixed income securities and the remainder is placed in contracts tied to a stipulated stock index is:
Correct Answer: A
Rationale: Option A, Equity index whole life, accurately describes a policy where a significant portion of the premium is invested in fixed income securities, while a smaller portion is linked to a stock index, allowing for potential growth based on market performance.
Option B, Current assumption whole life, does not fit as it primarily focuses on guaranteed interest rates rather than linking to stock indices.
Option C, Variable life, involves investments in various sub-accounts, including stocks and bonds, but does not specifically allocate a fixed percentage to traditional fixed income securities.
Option D, Single premium whole life, requires a lump-sum payment for a whole life policy, without the investment structure described in the question.
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