What feature does an Equity Index Life policy provide regarding cash value?

Prepare for the Maine Life Insurance Test. Use flashcards and multiple choice questions with explanations. Get exam-ready now!

An Equity Index Life policy is designed to offer a blend of life insurance protection with the potential for cash value growth tied to a stock market index, such as the S&P 500. The correct answer highlights the key characteristic of this type of policy, which is the minimum rate of accumulation coupled with index tracking.

This means the cash value of an Equity Index Life policy has a guaranteed minimum interest rate, ensuring that it will not decrease in value even if market conditions are unfavorable. At the same time, the cash value can increase based on the performance of a specified stock market index, allowing policyholders to benefit from potential market gains without the risk of direct investment in stocks. This combination of features makes it attractive for those looking for both protection and growth in their cash value over time.

In contrast, guaranteed annual increases in cash value or fixed interest rates are characteristics of other types of life insurance products but do not accurately describe the unique features of an Equity Index Life policy. Additionally, the notion that cash value is payable only at death does not apply, as policyholders can access the cash value while they are alive through loans or withdrawals, providing greater flexibility and options during their lifetime.

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