The correct answer is D. Secure and safe investment.
Cash value life insurance is a type of life insurance policy that allows the policyholder to accumulate a cash value over time. This cash value can be used for a variety of purposes, such as retirement savings, college tuition, or a down payment on a home.
One of the advantages of cash value life insurance is that it is a secure and safe investment. The cash value is invested in a variety of assets, such as stocks, bonds, and mutual funds. This diversification helps to protect the value of the cash value from market fluctuations.
In addition, cash value life insurance is a tax-advantaged investment. The cash value grows on a tax-deferred basis, which means that taxes are not owed on the earnings until the money is withdrawn. This can provide a significant tax advantage over other types of investments.
Finally, cash value life insurance can provide a death benefit in the event of the policyholder’s death. This death benefit can be used to provide financial support to the policyholder’s loved ones.
While cash value life insurance does have some advantages, it is important to note that it is also a complex product with a number of fees and charges. It is important to understand all of the costs associated with cash value life insurance before purchasing a policy.
Here is a brief explanation of each option:
- A. Reduced returns on account of inflation: This is not an advantage of cash value contracts. In fact, inflation can erode the value of the cash value over time.
- B. Low accumulation in earlier years: This is not an advantage of cash value contracts. The cash value typically accumulates slowly in the early years of the policy.
- C. Lower yields: This is not an advantage of cash value contracts. The yields on cash value contracts are typically lower than the yields on other types of investments.