The correct answer is D. Secure investment.
Cash value insurance contracts are a type of life insurance policy that allows the policyholder to accumulate 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 insurance contracts is that they are a secure 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 volatility.
Another advantage of cash value insurance contracts is that they offer tax-deferred growth. The cash value grows tax-deferred, which means that the policyholder does not have to pay taxes on the earnings until they withdraw the money. This can be a significant advantage, as it allows the money to grow at a faster rate.
Finally, cash value insurance contracts can provide a death benefit. This death benefit is paid to the beneficiaries of the policy if the policyholder dies. The death benefit can be used to cover funeral expenses, outstanding debts, or to provide income for the beneficiaries.
Overall, cash value insurance contracts offer a number of advantages, including security, tax-deferred growth, and a death benefit. These advantages make them a good option for people who are looking for a secure way to save for retirement or other future goals.
Here is a brief explanation of each option:
- A. Returns subject to corroding effect of inflation: This is not an advantage of cash value insurance contracts. The cash value of these contracts is not guaranteed to keep up with inflation, which means that its purchasing power can decline over time.
- B. Low accumulation in earlier years: This is not an advantage of cash value insurance contracts. The cash value of these contracts typically accumulates slowly in the early years, which means that it may not be a good option for people who need to access their money quickly.
- C. Lower yields: This is not an advantage of cash value insurance contracts. The yields on cash value insurance contracts are typically lower than the yields on other investments, such as stocks and bonds.
- D. Secure investment: This is an advantage of cash value insurance contracts. The cash value of these contracts is invested in a variety of assets, which helps to protect it from market volatility.