Massachusetts State Life Insurance Practice Exam

What is a primary feature of whole life insurance?

1. It only provides death benefits for a specified term

2. It matures at age 100 and accumulates cash value

3. It is designed only for burial coverage

4. It provides coverage under a master contract

The correct answer is: It matures at age 100 and accumulates cash value

Whole life insurance is characterized by its lifelong coverage and the accumulation of cash value, making the option highlighting the maturity age and cash value accumulation accurate. Whole life policies are structured to offer a guaranteed death benefit to beneficiaries as long as premium payments are maintained and they typically mature at age 100. During the life of the insured, a portion of the premium contributes to a cash value component that grows over time, providing a savings element alongside the death benefit. This feature allows policyholders to borrow against the cash value or withdraw it, offering flexibility that can be beneficial in various financial situations. The other choices reflect misconceptions about whole life insurance. Some pertain to term life insurance, which provides coverage for a specified period and does not accumulate cash value, while another suggests a limitation to burial coverage, which is not indicative of whole life insurance's broader scope of benefits. The option referencing coverage under a master contract is more relevant to group insurance policies, which operate differently compared to individual whole life insurance contracts.