Which statement best describes a universal life policy?

• A. Flexible Premiums with a Cash Value Earning Interest at Credited Rates
• B. Fixed Premiums with Guaranteed Cash Value
• C. No Cash Value and Level Premiums
• D. Cash Value Fluctuates with Credited Interest Rates

Answer: (A)

Universal life combines two main features: flexible premium payments and a cash value that grows based on interest credited by the insurer. You can adjust how much you pay (even skip payments within limits), and the policy’s cash value earns interest at rates determined by the insurer’s credited rate, not a fixed guaranteed rate. The death benefit can also be adjusted within allowed ranges as the cash value changes.

That makes the description of flexible premiums with a cash value earning interest at credited rates the best fit. The other choices miss this combination: fixed premiums with guaranteed cash value reflects whole life, no cash value with level premiums isn’t universal life, and cash value fluctuating with credited rates alone omits the important premium flexibility.