What is a common feature of whole life insurance policies regarding cash values?

What is a common feature of whole life insurance policies regarding cash values?

• A. They have no cash value component
• B. They accumulate cash value over time
• C. They decrease in cash value as premiums are paid
• D. They rely solely on term coverage

Answer: (B)

Whole life insurance policies are distinguished by their ability to accumulate cash value over time. This cash value is a living benefit that policyholders can access during their lifetime, making it a unique feature compared to other types of life insurance, such as term insurance, which does not build any cash value. As premiums are paid, a portion of those premiums goes into this cash value component, which grows at a guaranteed rate, providing a savings element to the policy. Policyholders can borrow against this cash value, or it can be used to pay premiums or even provide a death benefit for beneficiaries if the policyholder passes away. This growth in cash value ensures that whole life policies not only offer a death benefit but also serve as a financial asset, contributing to the policyholder's overall financial planning strategy. The progressive accumulation of cash value is a hallmark of whole life insurance, reinforcing long-term financial stability for the insured.

Whole life insurance policies are distinguished by their ability to accumulate cash value over time. This cash value is a living benefit that policyholders can access during their lifetime, making it a unique feature compared to other types of life insurance, such as term insurance, which does not build any cash value.

As premiums are paid, a portion of those premiums goes into this cash value component, which grows at a guaranteed rate, providing a savings element to the policy. Policyholders can borrow against this cash value, or it can be used to pay premiums or even provide a death benefit for beneficiaries if the policyholder passes away.

This growth in cash value ensures that whole life policies not only offer a death benefit but also serve as a financial asset, contributing to the policyholder's overall financial planning strategy. The progressive accumulation of cash value is a hallmark of whole life insurance, reinforcing long-term financial stability for the insured.