Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?

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

Answer: (C)

The key idea is that a policy can grow both cash value and the death benefit, and the death benefit can be designed to increase as the cash value grows. In universal life, you have flexible premiums and an adjustable death benefit. There are two death benefit options: one that stays level, and another that increases by the amount of cash value.

Here, the cash value has accumulated to 100,000 and the policy’s face amount has increased to 600,000. That implies a base amount of 500,000 plus the 100,000 cash value, totaling 600,000 for the death benefit. That pattern—death benefit rising in tandem with cash value—fits universal life with an increasing death benefit.

Term life wouldn’t have cash value, so it’s not a match. Whole life generally keeps the face amount fixed even as cash value grows. Variable life can involve investment-based changes to the death benefit, but the clean 500,000 base plus 100,000 cash value structure is a hallmark example of an increasing death benefit in universal life.