The correct answer is C. Lower yields.
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 offer a safe and 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 fluctuations.
Another advantage of cash value insurance contracts is that they can help to inculcate saving discipline. The policyholder is required to make regular premium payments, which helps to build the cash value over time. This can be helpful for people who have difficulty saving money on their own.
Finally, cash value insurance contracts can offer tax advantages. The cash value is not subject to income tax until it is withdrawn. This can make cash value insurance contracts a tax-efficient way to save for retirement or other long-term goals.
However, it is important to note that cash value insurance contracts also have some disadvantages. One of the biggest disadvantages is that they typically have lower yields than other investment options, such as stocks or mutual funds. This means that the cash value may not grow as quickly as it would in other investments.
Another disadvantage of cash value insurance contracts is that they can be expensive. The premiums are typically higher than for other types of life insurance policies. This is because the insurance company is not only providing death benefit protection, but also investing the premiums to build the cash value.
Finally, cash value insurance contracts can be complex. It is important to understand all of the terms and conditions of the policy before you purchase it. Otherwise, you may end up paying more than you need to or not getting the benefits that you expect.
Overall, cash value insurance contracts can be a good option for people who are looking for a safe and secure investment that can also help them to save for retirement or other long-term goals. However, it is important to understand the risks and potential drawbacks of these contracts before you purchase one.