Which feature is characteristic of a traditional whole life insurance policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Whole life is a form of permanent insurance that combines three guaranteed elements: a level premium that does not increase with age, a death benefit payable whenever the insured dies (not just during a term), and a cash value that accumulates over time on a tax-deferred basis. The level premium structure charges more than the current cost of insurance in the early years, building a reserve (cash value) that funds the higher cost of insurance in later years. This predictable design distinguishes whole life from term coverage and from variable products whose benefits depend on investment performance.
Why the other options are wrong
- B) Expiring at the end of a term with no cash value describes term insurance, not whole life.
- C) Whole life uses a level premium computed to remain constant for life; increasing premiums describe yearly renewable term or modified designs.
- D) Whole life guarantees the death benefit and premium; variable life, not whole life, exposes the benefit to investment results.
Memory hook
Whole life = forever, fixed price, growing piggy bank. Level premium pays for a lifetime promise.