The correct answer is: A. Lower yields are a disadvantage in cash value contracts.
A cash value life insurance policy is a type of life insurance policy that builds cash value over time. The cash value can be used for a variety of purposes, such as retirement savings, college savings, or a down payment on a home.
One of the advantages of cash value life insurance policies is that they offer tax-deferred growth. This means that the money in the cash value account grows tax-free until it is withdrawn. However, there are also some disadvantages to cash value life insurance policies. One of the biggest disadvantages is that they typically have lower yields than other types of investments, such as stocks or bonds. This means that the money in the cash value account may not grow as quickly as it would in other types of investments.
Another disadvantage of cash value life insurance policies is that they can be expensive. The premiums for these policies are typically higher than the premiums for term life insurance policies. This is because cash value life insurance policies offer more features, such as the ability to borrow against the cash value or use it to pay for qualified medical expenses.
Overall, cash value life insurance policies can be a good option for people who are looking for a way to save for retirement or other long-term goals. However, it is important to understand the risks and potential drawbacks of these policies before you purchase one.
Here is a brief explanation of each option:
- A. Lower yields are a disadvantage in cash value contracts. As mentioned above, cash value life insurance policies typically have lower yields than other types of investments. This means that the money in the cash value account may not grow as quickly as it would in other types of investments.
- B. Discipline in saving is not an advantage in cash value contracts. This is not true. One of the advantages of cash value life insurance policies is that they can help you to be more disciplined with your savings. This is because the premiums for these policies are typically paid on a monthly basis. This can help you to develop a habit of saving money on a regular basis.
- C. Income Tax advantage is not an advantage in cash value contracts. This is also not true. One of the advantages of cash value life insurance policies is that they offer tax-deferred growth. This means that the money in the cash value account grows tax-free until it is withdrawn. This can be a significant advantage, especially if you are in a high tax bracket.
- D. Safe and secure investment is not an advantage in cash value contracts. This is not true. Cash value life insurance policies are considered to be safe and secure investments. This is because they are backed by the financial strength of the insurance company.