What is a feature of traditional whole life insurance?

What is a feature of traditional whole life insurance?

• A. It has flexible premiums.
• B. It includes varying death benefits.
• C. It accumulates cash value.
• D. It has decreasing death benefits.

Answer: (C)

Traditional whole life insurance is characterized by its ability to accumulate cash value over time. This cash value is built through the payment of premiums, which not only provide a death benefit to the beneficiaries upon the insured's death but also contribute to the savings component of the policy. As premiums are paid, a portion is allocated towards the cash value, which grows at a guaranteed rate set by the insurance company. This cash value can be accessed by the policyholder in the form of loans or withdrawals, providing a source of funds while the insured is still living. This feature differentiates whole life insurance from term life insurance, which does not offer a cash value component. The consistency in premiums and the stable death benefit are also hallmarks of whole life policies, further emphasizing the significance of cash value accumulation as a defining feature.

Traditional whole life insurance is characterized by its ability to accumulate cash value over time. This cash value is built through the payment of premiums, which not only provide a death benefit to the beneficiaries upon the insured's death but also contribute to the savings component of the policy.

As premiums are paid, a portion is allocated towards the cash value, which grows at a guaranteed rate set by the insurance company. This cash value can be accessed by the policyholder in the form of loans or withdrawals, providing a source of funds while the insured is still living. This feature differentiates whole life insurance from term life insurance, which does not offer a cash value component.

The consistency in premiums and the stable death benefit are also hallmarks of whole life policies, further emphasizing the significance of cash value accumulation as a defining feature.