Massachusetts State Life Insurance Practice Exam

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Study for the Massachusetts State Life Insurance Exam. Use our flashcards and multiple choice questions, each with hints and explanations. Prepare confidently for your test!

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What is a drawback of whole life insurance?

  1. Lower premiums compared to term insurance

  2. Protection is typically more expensive due to living benefits

  3. Provides benefits only upon death of the insured

  4. Cash values do not accumulate over time

The correct answer is: Protection is typically more expensive due to living benefits

Whole life insurance is designed to provide lifelong coverage and comes with a savings component that accumulates cash value over time. However, one of the major drawbacks of this type of insurance is that the premiums are significantly higher than those associated with term insurance. This increase in cost is primarily due to the living benefits it provides, such as the ability to accumulate cash value and potential dividends, which come at a premium. The living benefits and cash accumulation make it a more comprehensive insurance option, but they also contribute to its higher cost compared to term insurance, which offers coverage for a specified period without cash accumulation. Therefore, while whole life insurance may offer more benefits overall, the expense associated with these additional features is a key drawback for many consumers.