63. In looking through a life insurance contract, an insured finds a table stating that in the 20th policy year, the cash value is $480 per $1,000 of Death benefit. What type of policy did the insured purchase?
Answer: A
The insured purchased a Straight Life policy.
A Straight Life policy is characterized by its guaranteed cash value accumulation over time, which is evident in the 20th policy year where the cash value is $480 per $1,000 of Death benefit.
A) Straight Life
This option is correct as a Straight Life insurance policy typically provides a guaranteed cash value that increases over the years, making it consistent with the stated cash value of $480 in the 20th policy year.
B) Universal Life
Universal Life insurance offers flexible premiums and death benefits, with cash value that can fluctuate based on interest rates and policy charges. Unlike the guaranteed cash value in a Straight Life policy, Universal Life does not provide a fixed cash value at a specific policy year.
C) Variable Life
Variable Life insurance allows the policyholder to invest the cash value in various investment options, leading to potentially varying cash values. The cash value is not guaranteed and can change significantly, which contradicts the certainty of the cash value stated in the question.
D) Increasing Term
Increasing Term insurance provides a death benefit that increases over time but does not accumulate cash value. Since the question specifies a cash value at a certain point in the policy, this option is not applicable.
Conclusion
The Straight Life policy is definitively the correct answer as it aligns with the guaranteed cash value presented in the 20th policy year. All other options fail to meet the criteria of providing a fixed cash value, which is a hallmark of the Straight Life insurance policy.