Michigan Life Insurance Practice Exam

Whole life insurance is designed to provide coverage for the insured's entire lifetime, which is one of its defining characteristics. A fundamental feature of this type of policy is that it typically has fixed premiums that remain consistent throughout the life of the policy. This means that the premium amount does not change, providing both policyholders and beneficiaries a sense of stability and predictability in financial planning.

In addition to fixed premiums, whole life insurance also accumulates cash value over time, which can serve as a living benefit for the policyholder. The policyholder may borrow against the cash value or even withdraw funds, depending on the policy terms. This feature differentiates it from term life insurance, which does not accumulate cash value and only provides coverage for a limited period.

Understanding this aspect of whole life insurance is vital for individuals considering long-term financial planning, as it allows them to invest in a policy that provides both death benefits and cash value potential.