International Baccalaureate (IB) Practice Exam

Any insurance with cash value or that combines insurance with investments is a bad idea. True or False?

1. True

2. False

3. It depends on the financial strategy.

4. Recommended for long-term savings.

The correct answer is: True

The assertion that any insurance with cash value or that combines insurance with investments is a bad idea is overly simplistic and does not take into account the nuances of financial planning and individual needs. While some may advise caution regarding these types of insurance products due to their often higher costs and complexity compared to term life insurance, categorically deeming them a bad idea ignores potential benefits they can offer. For some individuals, life insurance policies that accumulate cash value can serve as a financial tool that provides both insurance coverage and a savings component. These policies, such as whole life or universal life, can be advantageous for long-term financial strategies, especially for those looking for a stable investment with a death benefit. They may offer tax-deferred growth and the ability to borrow against the cash value. The context of personal financial goals, risk tolerance, and the overall financial strategy plays a crucial role in determining whether such products may be suitable. Therefore, a blanket statement labeling these products as "bad" does not hold true for everyone, as many factors should be considered in making such a decision.