Texas Life Agent Practice Exam

What is a primary feature of Whole Life insurance?

1. Flexible premium payments

2. Guaranteed cash value accumulation

3. Term coverage options

4. Reinstatement feature

The correct answer is: Guaranteed cash value accumulation

The primary feature of Whole Life insurance is guaranteed cash value accumulation. Whole Life policies are designed to provide coverage for the insured's entire life, and as long as premiums are paid, a significant aspect of this product is that it builds cash value over time. This cash value grows at a guaranteed rate determined by the insurance company, and it accumulates on a tax-deferred basis. The policyholder can access this cash value through loans or withdrawals, making it a crucial component of their financial planning. While flexible premium payments, term coverage options, and reinstatement features are associated with some types of life insurance, they don't define Whole Life insurance in the same way that guaranteed cash value accumulation does. Flexible premium payments are more characteristic of universal life policies. Term coverage options aren't applicable here since Whole Life insurance provides coverage for the entire lifetime instead of a specified term. The reinstatement feature, while common in many life insurance policies, does not specifically highlight the unique attributes of Whole Life insurance. Thus, the guaranteed cash value accumulation is the defining feature that sets Whole Life apart from other life insurance offerings.