Which policy type blends insurance with investment components and has cash values tied to investment performance?

• A. Term Life
• B. Variable Whole Life
• C. Universal Life
• D. Nonparticipating Whole Life

Answer: (B)

The main idea being tested is which policy blends insurance with an investment component where the cash value depends on how investments perform. This describes variable whole life: it provides permanent life insurance with fixed premiums, but the cash value goes into separate investment accounts chosen by the insured. Those accounts' performance drives the cash value (and can influence the death benefit), so the policyholder bears investment risk and has the potential for higher long-term cash value growth.

Term life offers protection only with no cash value, so it doesn’t involve investment-linked growth. Nonparticipating whole life provides a fixed, guaranteed cash value and does not participate in market gains. Universal life has flexible premiums and cash value tied to credited interest rather than directly to investment performance, so it isn’t cash-value growth tied to market results. Therefore, the option that best matches cash values tied to investment performance is variable whole life.