California Insurance License Exam Practice Test Practice Question
Which policy's accumulation value increases according to market rates?
Correct Answer: A
Rationale: Indexed universal life policies accumulate value based on a stock market index, allowing for potential growth linked to market performance. This means that as market rates increase, so does the accumulation value of the policy.
Whole life policies offer a guaranteed cash value that grows at a fixed rate, independent of market fluctuations, limiting potential growth. Term life policies do not accumulate cash value at all; they provide coverage for a specified period without any savings component. Graded premium whole life policies have a fixed premium structure with a guaranteed cash value that increases over time but does not vary with market rates.
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