PSI Insurance Practice Exam

The policy type backed by equity investments and allows the policyholder to adjust the death benefit is Variable Universal Life (VUL). This type of life insurance combines the benefits of a universal life insurance policy with the investment component of variable life insurance.

In a Variable Universal Life policy, the policyholder can allocate their premiums among various investment options, including stock and bond mutual funds, which are subject to market risks. This investment component can potentially yield higher returns than traditional whole life policies, which have guaranteed cash values and lower earning potential.

Additionally, Variable Universal Life policies provide flexibility in terms of both premium payments and the death benefit. Policyholders have the ability to change the amount of the death benefit, which can be increased or decreased depending on their financial needs at any given time. This adaptability makes VUL an attractive option for those who desire both a life insurance product and an investment opportunity.

It is important to note that the other types of policies listed do not share these features: Whole Life insurance provides fixed premiums and death benefits with guaranteed cash value, Term Life offers coverage for a specified period without investment components, and Endowment Policies typically pay out after a certain period or upon death but do not allow flexible death benefits or investment adjustments.