Texas Life Agent Practice Exam

Which of the following is a potential advantage of a whole life insurance policy?

1. Lower premiums than term life

2. Guaranteed cash value accumulation

3. Flexible premium payments

4. Coverage only for a specified term

The correct answer is: Guaranteed cash value accumulation

A whole life insurance policy offers several distinctive advantages, one of which is guaranteed cash value accumulation. This feature sets whole life insurance apart from other types of life insurance, such as term life, which does not build cash value over time. The cash value in a whole life policy grows at a guaranteed rate, and this accumulation occurs on a tax-deferred basis. Policyholders can borrow against this cash value, potentially use it for retirement income, or access funds in an emergency. In contrast to other options where cash value is not a component, this guaranteed growth provides policyholders with a savings element alongside the life insurance coverage. This aspect of whole life insurance can be particularly appealing for individuals looking for both protection and a means to save over the long term. Overall, the guaranteed cash value accumulation is a key benefit, making whole life insurance a compelling choice for those seeking financial security and investment growth within their insurance policy.