Arizona Life and Health Practice Exam

Which of the following is a characteristic of whole life insurance?

1. It provides only temporary coverage.

2. It has a level premium for the life of the insured.

3. It adjusts coverage amounts yearly.

4. It does not build cash value.

The correct answer is: It has a level premium for the life of the insured.

Whole life insurance is characterized by its provision of permanent coverage, meaning it remains in force as long as the premiums are paid. One of the most notable features of whole life policies is that they come with a level premium. This means that the premium amount remains consistent throughout the life of the insured, making it easier for policyholders to budget their insurance expenses over the long term. In addition to this level premium, whole life insurance also builds cash value over time, which can be accessed by the policyholder under certain circumstances. This cash value is a significant aspect, as it distinguishes whole life from term insurance, which provides coverage for a specified period without building any cash value. The predictability of the premiums and the additional financial benefit of cash value accumulation are key selling points of whole life insurance, making it a popular choice among individuals seeking lifelong coverage and savings.