South Carolina Life Insurance Practice Exam

What type of whole life insurance policy generates immediate cash value?

1. Term Life Insurance

2. Standard Whole Life

3. Single Premium Whole Life

4. Universal Life Insurance

The correct answer is: Single Premium Whole Life

A Single Premium Whole Life policy generates immediate cash value because it is funded with a one-time lump-sum premium payment. This means that as soon as the policy is issued, the cash value is created instantaneously and becomes accessible to the policyholder. This type of policy often appeals to individuals who wish to establish a long-term investment in life insurance while also benefiting from the immediate availability of cash value, which can be borrowed against or withdrawn if necessary. In contrast, whole life policies generally accumulate cash value over time as premiums are paid. Therefore, options like Standard Whole Life and Universal Life insurance do not provide immediate cash value like a Single Premium Whole Life policy does. Term Life Insurance, on the other hand, does not build any cash value at all, as it is meant to provide coverage for a specific term without an investment component.