Which statement about a Whole Life policy is true?

Which statement about a Whole Life policy is true?

• A. Premiums are only payable for a limited time
• B. Cash value may be borrowed against
• C. It provides no cash value
• D. It expires at a specific age

Answer: (B)

A Whole Life policy is designed to provide lifelong coverage, and one of its key features is the accumulation of cash value over time. This cash value builds at a guaranteed rate and can be accessed by the policyholder during their lifetime. The policyholder has the option to borrow against this cash value, which provides a source of funds without the need to surrender the policy. This borrowing includes the stipulation that any unpaid loans will be deducted from the death benefit when the insured passes away. While the cash value adds a savings component to the policy, the other options presented do not align with the fundamental characteristics of Whole Life insurance. For instance, premiums are paid throughout the life of the policy rather than only for a limited time, it does build cash value, and it does not expire at a specific age. This makes borrowing against the cash value the true statement regarding Whole Life policies.

A Whole Life policy is designed to provide lifelong coverage, and one of its key features is the accumulation of cash value over time. This cash value builds at a guaranteed rate and can be accessed by the policyholder during their lifetime. The policyholder has the option to borrow against this cash value, which provides a source of funds without the need to surrender the policy. This borrowing includes the stipulation that any unpaid loans will be deducted from the death benefit when the insured passes away.

While the cash value adds a savings component to the policy, the other options presented do not align with the fundamental characteristics of Whole Life insurance. For instance, premiums are paid throughout the life of the policy rather than only for a limited time, it does build cash value, and it does not expire at a specific age. This makes borrowing against the cash value the true statement regarding Whole Life policies.