West Virginia State Life Insurance Practice Exam

Which statement may a producer make to a client about a whole life policy?

1. "It offers adjustable premiums."

2. "Nonforfeiture benefits will be available after a period of time."

3. "It guarantees higher returns than term insurance."

4. "It has no cash value."

The correct answer is: "Nonforfeiture benefits will be available after a period of time."

A whole life policy is a type of permanent life insurance that provides coverage for the insured's entire lifetime, as long as premiums are paid. One key feature of whole life policies is the presence of nonforfeiture benefits. These benefits ensure that if the policyholder decides to stop paying premiums or surrenders the policy, they still receive some value from the policy that has accumulated over time. Nonforfeiture benefits can typically take the form of cash value or paid-up insurance, which preserves some amount of coverage even after premium payments cease. This benefit provides security and peace of mind to policyholders, as they are not completely losing the value of their investment in the policy. The other statements do not accurately represent whole life policies. For example, adjustable premiums are characteristic of flexible policies, not the fixed premiums associated with whole life. Claims about guaranteed returns exceeding those of term insurance misinterpret the purpose of term, which is typically lower cost but does not build equity. Moreover, stating that whole life policies have no cash value fails to recognize the cash value component that is a defining characteristic of this insurance type.