Types of Policies
If the reference equity index suffers a severe negative loss (-20%) during a policy year, what protects the equity-indexed policyowner's cash value?
Answer and explanation
Answer: C. Equity-indexed policies feature a guaranteed minimum interest floor (often 0%), ensuring negative index returns do not reduce accumulated cash values.Source: NAIC Indexed Life Insurance Guide — PDF page 5, Guaranteed Floor
More types of policies questions
- An insured’s health deteriorates during a renewable term policy. At the end of the term, which feature is most valuable?
- An insured's health worsens before a renewable term policy expires. The renewal right is still available. Which outcome best reflects that feature?
- An owner buys a $100,000 ordinary whole life policy. How do cash values accumulate over the life of the policy?
- An owner of a flexible-premium deferred annuity wants to know if they can continue making purchase payments in the future. Which statement is most accurate?
- As an ordinary whole life policy matures over time and cash values increase, what happens to the insurer's net amount at risk?
- At what point does a standard ordinary whole life policy reach its ultimate maturity date?
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