PSI Ohio Insurance Practice Exam

What type of insurance provides coverage for the entire life of the insured as long as the premiums are paid?

1. Term life insurance

2. Whole life insurance

3. Universal life insurance

4. Variable life insurance

The correct answer is: Whole life insurance

Whole life insurance provides coverage for the entire life of the insured, as long as the premiums are paid. This type of insurance is designed to remain in force for the lifetime of the insured, offering a guaranteed death benefit and a savings component known as cash value. As the insured pays premiums, part of that payment is allocated to the cash value, which accumulates over time on a tax-deferred basis. This means the policyholder can borrow against it or even withdraw from it under certain conditions. In contrast, term life insurance only provides coverage for a specified term or period. Once that term expires, coverage can end, and there is no cash value component. Universal life insurance offers flexibility in terms of premiums and death benefits but may also include adjustable coverage, while variable life insurance allows policyholders to invest in various investment options with the potential for cash value growth subject to market performance. However, neither of these options guarantees lifelong coverage in the same way whole life insurance does.