PSI Ohio Insurance Practice Exam

Which of the following best describes whole life insurance?

1. Temporary coverage with lower premiums

2. Permanent coverage with cash value accumulation

3. Flexible coverage amount depending on need

4. Coverage that lasts for a specified term

The correct answer is: Permanent coverage with cash value accumulation

Whole life insurance is characterized by providing permanent coverage, meaning that the policy remains in force for the insured's entire lifetime as long as premiums are paid. Unlike term insurance, which offers temporary protection, whole life insurance guarantees a death benefit that will be paid out upon the death of the insured, regardless of when that occurs. In addition to the lifelong coverage, whole life insurance policies accumulate cash value over time. This cash value is a savings component that grows at a guaranteed rate and can be accessed by the policyholder through loans or withdrawals, allowing them to utilize their policy as a financial asset. Therefore, the features of whole life insurance not only provide security through a death benefit but also offer the benefit of cash value accumulation, making it an important financial product for long-term planning and saving.