Which type of policy is described as a permanent policy with a cash value account earning interest and a flexible premium?

• A. Whole life
• B. Term life
• C. Universal life
• D. Variable life

Answer: (C)

This question focuses on distinguishing permanent life policies by how the cash value and premiums work. A universal life policy fits this description: it provides lifelong protection, has a cash value that earns interest (credited by the insurer), and allows flexible premium payments. The policyowner can adjust how much and when they pay (within limits) and, in many versions, adjust the death benefit.

Think of it as permanent coverage with an accumulating cash value that grows at a credited rate, rather than a fixed, guaranteed growth. This contrasts with whole life, which requires fixed premiums and guarantees a cash value at a set rate; term life, which has no cash value at all; and variable life, where the cash value is tied to investments and the premium is typically fixed, with growth depending on market performance rather than a guaranteed interest credit.