What type of life insurance policy should be recommended to Carol for providing financial support for her grandchild?

Prepare for the Kaplan Certified Financial Planner (CFP) Test. Study with flashcards and multiple choice questions, each question has hints and explanations. Get ready for your exam!

When recommending a life insurance policy to provide long-term financial support for Carol's grandchild, a universal life insurance policy is a suitable choice. Universal life insurance is a type of permanent life insurance that offers flexibility in premium payments and allows for cash value accumulation, which can be beneficial in providing financial resources for future needs.

One of the key advantages of universal life insurance is its ability to adapt to changing circumstances. Carol can adjust her premiums and death benefit amounts as her financial situation evolves. This flexibility is particularly important when considering the long-term financial support for a grandchild, as it allows Carol to ensure that the policy remains aligned with her goals over time.

Additionally, the cash value component of a universal life policy can grow over time, providing another resource that may be tapped into later to fund the grandchild's education, major expenses, or other financial needs. This aspect distinguishes universal life from term life insurance, which does not build cash value and is only in force for a specified period.

Given these benefits, a universal life insurance policy is appropriate for providing financial protection and accumulating cash value, making it a strong recommendation for Carol’s goal of supporting her grandchild financially.