New York Child Abuse Identification and Reporting Practice Exam

Which of the following is NOT a characteristic of variable whole life insurance?

1. It has a guaranteed minimum death benefit

2. Cash value can fluctuate

3. Premiums may vary

4. Policyholders can choose investment options

The correct answer is: It has a guaranteed minimum death benefit

The assertion that variable whole life insurance has a guaranteed minimum death benefit is not characteristic of this type of policy. Variable whole life insurance policies typically tie their death benefits to the performance of investment options chosen by the policyholder. Therefore, while there may be a minimum death benefit in other types of whole life insurance, variable whole life insurance does not guarantee this, especially since the death benefit can vary based on the cash value performance and investment choices. Understanding the characteristics of variable whole life insurance is essential. Cash value in these policies indeed fluctuates because it is linked to the performance of the underlying investments, which can go up or down based on market conditions. The premiums in variable whole life insurance also may not be fixed; they can vary depending on the insurance company’s pricing adjustments and the investment performance of the policy. Furthermore, policyholders have the unique ability to choose from various investment options for the cash value, allowing for potential growth based on market performance, which differentiates it from traditional whole life policies. By recognizing that the other characteristics presented—fluctuating cash value, variable premiums, and investment option selection—are inherent to variable whole life insurance, it reinforces the understanding that a guaranteed minimum death benefit does not apply, making it the correct answer.