Arizona Life and Health Practice Exam

What kind of policy provides coverage for a longer duration but may have a higher premium?

1. Term insurance

2. Whole life insurance

3. Short-term health insurance

4. Variable life insurance

The correct answer is: Whole life insurance

Whole life insurance is designed to provide coverage for the insured's entire lifetime, as long as premiums are paid. This type of policy not only offers a death benefit to the beneficiaries but also includes a cash value component that grows over time. The higher premium associated with whole life insurance reflects the cost of this lifelong coverage and the savings element that accumulates within the policy. While term insurance provides coverage for a specific period and is generally more affordable, it does not have the lifelong benefit or cash value. Short-term health insurance offers temporary coverage typically for a limited duration, and variable life insurance allows for investment choices but does not guarantee lifelong coverage in the same way whole life does. Thus, the comprehensive nature of whole life policies justifies the higher premium, making it the correct choice for longer-duration coverage.