South Carolina Life Insurance Practice Exam

Which of the following is a characteristic of whole life insurance?

1. Annual renewability

2. Level premiums

3. Term limits

4. High-risk premiums

The correct answer is: Level premiums

Whole life insurance is characterized by level premiums, meaning that the premium payment remains consistent throughout the life of the policyholder. This is one of the key features of whole life insurance, as it provides predictability in budgeting for policyholders. Unlike term insurance, where premiums can vary or increase upon renewal, whole life policies maintain the same premium amount for the entirety of the contract, typically until the insured reaches a specified age or passes away. Additionally, whole life insurance provides a death benefit and a cash value accumulation component, which also distinguishes it from other types of insurance that may not offer these features. The cash value grows at a guaranteed rate and can be accessed by the policyholder during their lifetime, adding to the appeal of whole life insurance. Overall, the stability of the level premiums is a primary reason individuals choose whole life insurance as part of their financial planning.