South Carolina Life Insurance Practice Exam

Which life insurance policy typically accrues cash value over time?

1. Term Life

2. Whole Life

3. Group Life

4. Universal Life

The correct answer is: Whole Life

Whole life insurance is designed to provide lifelong coverage while also accumulating cash value over time. This cash value component grows on a tax-deferred basis and is typically guaranteed to increase, subject to the terms of the policy. Policyholders can borrow against this cash value during their lifetime or may choose to cash it out if they no longer need the insurance coverage. Unlike whole life insurance, term life insurance does not build any cash value, as it simply provides a death benefit for a specified term. Group life insurance typically offers coverage for a group, like employees of a company, and generally does not have a cash value feature. Universal life insurance does have a cash value component, but it operates differently than whole life insurance; its cash value growth can vary based on interest rates and the insurer’s performance. The key feature of whole life insurance is its structured saving component, making it an attractive option for individuals looking not only for insurance coverage but also a way to save and accumulate cash value over the long term.