How does the performance of underlying investments impact a life insurance policy?

How does the performance of underlying investments impact a life insurance policy?

• A. It decreases the policyholder's premiums
• B. It affects the cash value growth of the policy
• C. It determines the death benefit amount
• D. It allows for quicker claim processing

Answer: (B)

The performance of underlying investments significantly influences the cash value growth of a life insurance policy, particularly in the case of permanent life insurance policies like whole life or universal life. These types of policies accumulate cash value over time, and this growth is often linked to the performance of specific investments held by the insurance company. If the investments perform well, the cash value in the policy can increase more rapidly, which may provide the policyholder with more options for accessing funds through loans or withdrawals. Conversely, if the underlying investments perform poorly, it can result in slower growth of the cash value. This relationship is crucial for policyholders who are planning for future financial needs and relying on the policy's cash value as part of their financial strategy.

The performance of underlying investments significantly influences the cash value growth of a life insurance policy, particularly in the case of permanent life insurance policies like whole life or universal life. These types of policies accumulate cash value over time, and this growth is often linked to the performance of specific investments held by the insurance company. If the investments perform well, the cash value in the policy can increase more rapidly, which may provide the policyholder with more options for accessing funds through loans or withdrawals. Conversely, if the underlying investments perform poorly, it can result in slower growth of the cash value. This relationship is crucial for policyholders who are planning for future financial needs and relying on the policy's cash value as part of their financial strategy.