Uipath Practice Test & Exam Prep

How does indexed universal life generally credit interest?

By giving the policyowner direct ownership of index stocks By linking credited interest to an external index subject to contract terms such as caps, participation rates, and floors By guaranteeing the exact annual return of the S&P 500 By placing all premiums in a money market mutual fund

Correct Answer:

By linking credited interest to an external index subject to contract terms such as caps, participation rates, and floors

Explanation:

Indexed universal life credits interest using a formula tied to an external market index. The policyowner does not directly own the index, and credited interest is governed by contract features such as floors, caps, or participation rates.

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