AD Banker Comprehensive Practice Exam

What is a characteristic of a whole life policy?

1. It has a flexible premium.

2. It provides lifelong coverage.

3. It has a decreasing death benefit.

4. It is primarily for short-term needs.

The correct answer is: It provides lifelong coverage.

A whole life policy is designed to provide lifelong coverage, which is one of its key characteristics. This type of insurance guarantees that the policy will remain in force throughout the insured's lifetime, as long as premiums are paid. Whole life policies also build cash value over time, which can be accessed by the policyholder, adding to the long-term financial benefits offered by this type of coverage. In contrast, other characteristics listed do not apply to whole life policies. For instance, flexible premium payments are more common in universal life policies, while whole life typically requires fixed premium payments. A decreasing death benefit is associated with certain types of term life insurance rather than whole life, which has a level death benefit that remains constant. Lastly, whole life insurance is not primarily designed for short-term needs; it is meant for permanent coverage, whereas other insurance types are more appropriate for temporary coverage needs.