PSI Ohio Insurance Practice Exam

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Study for the Ohio Insurance Test. Prepare with flashcards and multiple choice questions, each question accompanied by hints and explanations. Excel in your exam!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

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Which type of insurance policy can grow cash value based on stock market performance?

Whole life insurance
Term life insurance
Indexed universal life insurance
Variable life insurance

The correct answer is: Indexed universal life insurance

The type of insurance policy that can grow cash value based on stock market performance is indexed universal life insurance. This policy links its cash value growth to a stock market index, such as the S&P 500, rather than providing a fixed interest rate. As the underlying index performs well, the cash value of the policy can increase, allowing policyholders to benefit from potential market gains. However, there is usually a cap on the maximum growth rate to protect the insurance company. This type of policy also offers flexible premium payments and death benefits, making it an appealing option for individuals looking for both life insurance coverage and the opportunity for cash value accumulation influenced by market performance. In contrast, whole life insurance offers a guaranteed cash value growth, but this growth is not tied to the stock market—rather, it provides a consistent, predetermined return over time. Term life insurance does not build cash value at all, as it is designed solely for coverage during a specified term without any investment component. Variable life insurance does allow policyholders to allocate their cash value among various investment options, including stock and bond funds, but changes in cash value are directly tied to the performance of those specific investments rather than a market index.