What statement best differentiates term life and whole life in terms of premium structure and cash value?

What statement best differentiates term life and whole life in terms of premium structure and cash value?

• A. Term life has level or increasing premiums for a fixed term with no cash value; whole life has higher premiums, level, plus guaranteed cash value.
• B. Term life has cash value and level premiums; whole life has no cash value.
• C. Term life premiums decrease; whole life premiums increase.
• D. Term life is permanent; whole life is a term.

Answer: (D)

Term life provides temporary protection for a set number of years and typically has level or increasing premiums during that term, with no cash value built up. Whole life offers permanent protection, with higher premiums that are generally level for life, and a guaranteed cash value that grows over time. So the statement that best captures the difference is that term life has level or increasing premiums for a fixed term with no cash value, while whole life has higher premiums, level, and guaranteed cash value. The other choices mix up cash value and permanence, which is why they don’t fit.

Term life provides temporary protection for a set number of years and typically has level or increasing premiums during that term, with no cash value built up. Whole life offers permanent protection, with higher premiums that are generally level for life, and a guaranteed cash value that grows over time. So the statement that best captures the difference is that term life has level or increasing premiums for a fixed term with no cash value, while whole life has higher premiums, level, and guaranteed cash value. The other choices mix up cash value and permanence, which is why they don’t fit.