New Jersey Life Producer Practice Exam

Question: 1 / 400

What typically happens if a policyholder decides to withdraw funds from their variable life insurance policy?

The cash value will increase

The death benefit will be permanently reduced

When a policyholder withdraws funds from a variable life insurance policy, the death benefit is typically reduced. This is because variable life insurance policies have a cash value component linked to the underlying investment performance. When funds are withdrawn, the cash value decreases, which in turn affects the death benefit that is paid out to beneficiaries upon the policyholder's death. This reduction reflects the amount withdrawn, as the death benefit is calculated based on the remaining cash value combined with the face amount of the policy.

In essence, the action of withdrawing funds not only impacts the immediate cash value but also the long-term promise of the policy, which is to provide a certain amount of financial protection to beneficiaries. This can be an important consideration for policyholders who need access to cash but also want to ensure their loved ones are adequately covered in the event of their passing.

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The premiums will be refunded

The insurance coverage will be terminated

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