Tennessee Insurance Practice Exam

Which characteristic typically applies to a whole life insurance policy?

1. Renewable without evidence of insurability

2. Has no cash value

3. Death benefit is level and guaranteed

4. Is limited to a specific term period

The correct answer is: Death benefit is level and guaranteed

A whole life insurance policy is designed to provide coverage for the insured's entire lifetime, as long as premiums are paid. One of its key characteristics is that the death benefit is level and guaranteed, meaning that the amount paid out upon the insured's death will not change throughout the life of the policy. This guarantee offers peace of mind to policyholders, knowing that their beneficiaries will receive a fixed amount. Additionally, whole life policies accumulate cash value over time, providing a savings component that can be accessed through policy loans or withdrawals. This aspect distinguishes whole life insurance from term policies, which only provide coverage for a specific term period and do not accumulate cash value. In contrast, the characteristics of renewable options without evidence of insurability and having no cash value apply to different types of insurance or policies. Whole life insurance specifically offers the benefit of a guaranteed death benefit that remains constant, which is a fundamental aspect of its value as a long-term financial planning tool.