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Answer: Variable life insurance is a type of term life insurance where the cash value grows at a variable interest rate; e.g., a variable index such as LIBOR plus a margin
**C is false.** Variable life insurance is **not** a type of term life insurance. It is a type of **whole life insurance** in which the policyholder directs how the cash value is invested. The cash value and eventual payout can vary with investment performance, although there is typically a minimum death benefit. Why the others are true: - **A**: Whole life covers the insured for life; term insurance covers a fixed period. - **B**: Universal life is a flexible-premium form of permanent insurance, and premiums may be reduced subject to maintaining the policy. - **D**: Endowment insurance pays either on death during the term or at maturity, whichever occurs first.
Author: Manit Arora
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Q-702.3. There are many different life insurance products, including term, whole, variable, universal, variable-universal, and endowment. Each of the following definitions is correct EXCEPT which is false?
A
Whole life insurance lasts for the whole life of the policyholder, while term life insurance lasts a fixed period (e.g., five years or ten years)
B
Universal life insurance is a type of whole life insurance where the premium can be reduced to a specified minimum level without the policy lapsing
C
Variable life insurance is a type of term life insurance where the cash value grows at a variable interest rate; e.g., a variable index such as LIBOR plus a margin
D
Endowment life insurance lasts for a specified period and pays a lump sum either (i) when the policyholder dies or (ii) at the end of the period, whichever happens first
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