Life & Health Insurance Essentials: Understanding Term vs. Whole Life Policies Quiz

Whole Life insurance provides coverage for the entire lifetime of the insured, typically up to age 100, whereas Term Life insurance only provides coverage for a specific term of years.

Decreasing Term is a type of term life insurance where the death benefit decreases over the life of the policy. This type of policy is often used to cover specific financial obligations that decrease over time, such as a mortgage or a loan.

Whole life insurance policies have a cash value component that grows over time, unlike term life insurance which does not have cash value. Universal Life and Variable Life are also types of permanent life insurance policies that may have cash value, but in this case, Whole Life is the correct answer.

Term life insurance is typically more affordable than whole life insurance due to the fact that term life provides coverage for a specific period of time, while whole life provides coverage for the entirety of one's life. This key difference in coverage duration impacts the premium cost for each type of policy.

Whole Life insurance policies build cash value over time, which can be borrowed against. Term Life insurance does not offer this feature.

20 Pay Life policy requires premiums to be paid for only 20 years, allowing the cash value to grow faster compared to the Life Paid at 60 policy where premiums are paid until the age of 60. Term Life Insurance does not build cash value, and Universal Life Insurance may have different cash value growth structures.

Whole Life insurance policies typically have a cash value component that builds over time, allowing the policy to mature in two ways - through the death benefit or through the accumulated cash value. Term insurance policies do not have a cash value component and only provide coverage for a specific term. Universal and Variable Life insurance policies also have cash value components, but they do not necessarily mature in the same way as Whole Life policies.

Term life insurance only provides coverage for a specified term and does not accumulate cash value or offer any additional benefits. Whole Life, Universal Life, and Variable Life insurance policies have different ways of maturing and accumulating cash value over time.

Level Premium Term guarantees that premiums will remain the same throughout the term of the policy, whereas Level Term does not necessarily guarantee fixed premiums.

Level Term guarantees that the face amount remains level throughout the term of the policy, meaning it does not decrease or increase. Level Premium Term refers to the premiums staying the same each year, not the face amount. Renewable Term allows the policyholder to renew the policy at the end of the term but does not guarantee a level face amount. Decreasing Term involves the face amount decreasing over the term of the policy.

Taxes are typically due only on the interest earned within a whole life policy and not on the premiums paid or the death benefit value.

The cash value in a Whole Life policy grows tax deferred, meaning that the policyholder does not owe taxes on the growth until they withdraw funds.

Whole Life insurance typically comes with fixed premiums throughout the life of the policy, providing stability and predictability for the policyholder. On the other hand, Term Life insurance premiums may vary over time and are usually lower initially but can increase as the policyholder ages. Variable Life and Universal Life insurance also do not always guarantee fixed premiums.

Term life insurance typically has premiums that increase as you age because the risk of death increases with age. Whole Life, Universal Life, and Variable Life insurance policies may have level premiums that do not increase with age.

Limited Pay is the method of paying a Whole Life premium over a specified number of years, such as 20 Pay Life or 25 Pay Life. This means that the policyholder will pay premiums for a limited period of time instead of throughout their whole life.