Traditional whole life products

Correct answer: A level premium set at issue, a guaranteed death benefit, and a guaranteed cash value

Traditional whole life is the classic permanent contract: the premium is level and set at issue so it never rises with the insured's age, the death benefit is guaranteed whenever the insured dies while the policy is in force, and a guaranteed cash value builds inside the policy. The Texas Department of Insurance describes permanent coverage of this kind as lifelong protection that also builds cash value the owner can use, in contrast with term insurance, which covers only a limited period.

Correct answer: It is more than the current cost of protection, and the insurer holds the excess as reserves that appear on the policy as cash value

The true cost of protecting a life rises every year as the insured ages, but the whole life premium is level. That means the premium is more than the current cost of protection in the early years and less than it in the later years. The insurer holds the early overpayment as reserves, and that accumulation is what shows up on the policy as cash value and what keeps the premium from ever increasing.

Correct answer: A cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes

Because the owner has prepaid part of the cost of protection, Texas law does not let that value disappear on lapse. The Standard Nonforfeiture Law for Life Insurance requires life policies to provide, after premiums have been paid for the period stated in the policy, a cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes (Tex. Ins. Code ch. 1105). In practice that appears as surrender for cash, reduced paid-up insurance, or extended term insurance.

Correct answer: The policy is paid up and coverage continues for the insured's lifetime with no further premiums due

This is limited-pay whole life: premiums are compressed into a set number of years or to a stated age, after which the policy is paid up but coverage continues for life. Shortening the paying period raises the annual premium and speeds cash value growth, but it does not shorten the protection, which remains permanent.

Correct answer: In Chapter 1101 of the Insurance Code, within Title 7, which governs life insurance and annuities

Policy form and provision requirements for life insurance delivered in Texas are found in Tex. Ins. Code ch. 1101. That chapter sits inside Title 7 of the Insurance Code (chapters 1101 through 1154), which governs life insurance and annuities generally.

Correct answer: Dividends are not guaranteed; when they are paid, the owner generally may take them in cash, use them to reduce premiums, buy paid-up additional insurance, or leave them to accumulate

A participating whole life policy may pay policy dividends, but dividends are not guaranteed. When they are paid, owners generally may take them in cash, use them to reduce premiums, buy paid-up additional insurance, or leave them to accumulate. A nonparticipating policy pays no dividends and relies on its guarantees alone.

Correct answer: The death benefit reduced by the unpaid loan balance and the interest owed on it

A whole life owner may borrow against the policy's cash value, but the Texas Department of Insurance warns that an unpaid loan and the interest on it reduce the amount the beneficiary receives (Tex. Dep't of Ins. Consumer Pub. CB018, Life Insurance Guide). The insurer settles the claim by subtracting the outstanding loan and interest from the death benefit.

Correct answer: The ordinary whole life policy has the lowest annual outlay of the three, and the shorter the paying period, the higher the premium and the faster the cash value grows

The premium-payment variations change only the payment period, not the permanence of the coverage. Ordinary (straight, continuous-premium) whole life spreads premiums over the insured's lifetime and therefore has the lowest annual outlay. Limited-pay whole life compresses the same cost into fewer years, so the shorter the paying period, the higher the premium and the faster the cash value grows; single-premium whole life is the extreme case, where one lump sum buys a fully paid-up policy. All three remain permanent coverage for life.

Correct answer: A level premium set at issue, a guaranteed death benefit, and a guaranteed cash value

Traditional whole life is the classic permanent contract, defined by three guarantees: a level premium fixed at issue that does not rise with the insured's age, a guaranteed death benefit payable whenever the insured dies while the policy is in force, and a guaranteed cash value that builds inside the policy. TDI describes permanent coverage of this kind as lifelong protection that also builds cash value the owner can use, in contrast with term insurance, which covers only a limited period.

Correct answer: It is more than the current cost of protection, and the insurer holds the overpayment as reserves that appear on the policy as cash value

The true annual cost of insuring a life rises as the insured ages. Leveling the premium means charging more than the current cost of protection in the early years and less than it in the later years. The insurer holds that early overpayment as reserves, and that accumulation is what shows up as the policy's cash value and what keeps the premium from ever increasing.

Correct answer: A cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes

Because a whole life owner prepays part of the cost of protection, Texas law does not allow that value to disappear on lapse. The Standard Nonforfeiture Law requires life policies to provide, after premiums have been paid for the period stated in the policy, either a cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes (Tex. Ins. Code ch. 1105).

Correct answer: Extended term insurance

Extended term insurance applies the accumulated value to continue the same face amount for a limited period, with no further premiums due. That matches an owner who wants the original face amount preserved and accepts a limited duration. Reduced paid-up insurance would instead keep coverage for life but at a smaller face amount.

Correct answer: Limited-pay whole life to age 65, with a higher annual premium than ordinary whole life and faster cash value growth

Limited-pay whole life compresses premiums into a set number of years or to a stated age, after which the policy is paid up while coverage continues for life. Because the same lifetime cost is paid over fewer years, the annual premium is higher than ordinary whole life and the cash value grows faster.

Correct answer: The applicant who buys ordinary (continuous-premium) whole life

Ordinary, or straight, whole life spreads premiums over the longest possible period — until the insured's death or the policy's maturity date — so it has the lowest annual outlay of the whole life premium variations. Shortening the paying period raises the premium, and a single premium concentrates the entire cost into one lump sum.

Correct answer: It may pay policy dividends, which are not guaranteed, and owners generally may take them in cash, apply them to premiums, buy paid-up additional insurance, or leave them to accumulate

A participating policy may pay policy dividends, but dividends are not guaranteed. Owners generally may take them in cash, use them to reduce premiums, buy paid-up additional insurance, or leave them to accumulate. A nonparticipating policy pays no dividends and relies on its guarantees alone. Because costs and features vary so much, TDI urges consumers to compare policies and companies before buying.

Correct answer: The unpaid loan balance and its interest reduce the amount the beneficiary receives

A whole life owner may borrow against the policy's cash value, but an unpaid loan and its interest reduce the amount the beneficiary receives at the insured's death (Tex. Dep't of Ins. Consumer Pub. CB018).

Correct answer: A level premium set at issue, a guaranteed death benefit, and a guaranteed cash value

Traditional whole life is the classic permanent contract, defined by three features: a level premium set at issue that does not rise with the insured's age, a guaranteed death benefit payable whenever the insured dies while the policy is in force, and a guaranteed cash value that builds inside the policy. TDI describes permanent coverage of this kind as lifelong protection that also builds cash value the owner can use, unlike term insurance, which covers only a limited period (Tex. Dep't of Ins. Consumer Pub. CB018, Life Insurance Guide).

Correct answer: Early premiums exceed the current cost of protection, and the insurer holds that overpayment as reserves, which appear on the policy as cash value.

The true cost of protecting a life rises each year as the insured ages. A level premium is therefore more than the current cost of protection in the early years and less than it in the later years. The insurer holds that early overpayment as reserves, and that accumulation is what appears on the policy as cash value and what allows the premium never to increase.

Correct answer: A cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes

The Standard Nonforfeiture Law for Life Insurance requires life policies to provide, after premiums have been paid for the period stated in the policy, either a cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes (Tex. Ins. Code ch. 1105). That is why a whole life owner's prepaid value does not simply disappear on lapse — typical choices are surrender for cash, reduced paid-up insurance, or extended term insurance.

Correct answer: Limited-pay whole life, paid up at age 65

Limited-pay whole life compresses the premiums into a set number of years or to a stated age — here, age 65 — after which the policy is paid up while coverage continues for the insured's lifetime. That matches a client who wants lifetime protection with no premiums after retirement.

Correct answer: The participating policy may pay policy dividends, which are not guaranteed; the nonparticipating policy pays none and relies on its guarantees alone.

A participating whole life policy may pay policy dividends, but those dividends are not guaranteed; owners generally may take them in cash, apply them to reduce premiums, buy paid-up additional insurance, or leave them to accumulate. A nonparticipating policy pays no dividends and relies solely on its contractual guarantees. Because costs and features vary so widely, TDI urges consumers to compare policies and companies before buying (Tex. Dep't of Ins. Consumer Pub. CB018, Life Insurance Guide).

Correct answer: The amount the beneficiary receives is reduced by the unpaid loan and the interest on it.

An owner may borrow against a whole life policy's cash value, but an unpaid loan and its interest reduce the amount the beneficiary receives (Tex. Dep't of Ins. Consumer Pub. CB018, Life Insurance Guide). The coverage stays in force; only the settlement amount is reduced by the outstanding debt.

Correct answer: Ordinary whole life has the lowest annual outlay of the three, and the shorter the premium-paying period, the higher the premium and the faster the cash value grows.

All three are whole life; only the payment period changes. Ordinary (straight, continuous-premium) whole life spreads premiums to death or maturity and therefore has the lowest annual outlay. With limited-pay and single-premium designs, the same lifetime cost is compressed into fewer years, so the shorter the paying period, the higher the premium and the faster the cash value grows.

Correct answer: Extended term insurance

Extended term insurance uses the accumulated value to continue the same face amount for a limited period with no further premiums, which matches an owner who prioritizes keeping the full death benefit. Reduced paid-up insurance would instead continue a smaller face amount permanently. Texas law requires the policy to provide a cash surrender value or a paid-up nonforfeiture benefit after premiums have been paid for the period stated in the policy (Tex. Ins. Code ch. 1105).

Correct answer: A level premium, a guaranteed death benefit, and a guaranteed cash value

Traditional whole life is the classic permanent contract: the premium is set at issue and stays level, the death benefit is guaranteed and payable whenever the insured dies while the policy is in force, and a guaranteed cash value builds inside the policy. The Texas Department of Insurance describes permanent coverage of this kind as lifelong protection that also builds cash value the owner can use, in contrast with term insurance, which covers only a limited period.

Correct answer: It is more than the current cost of protection, and the insurer holds the overpayment as reserves that appear on the policy as cash value

The true cost of insuring a life rises every year as the insured ages. Charging one level premium therefore means collecting more than the current cost of protection in the early years and less than it in the later years. The insurer holds that early overpayment as reserves; that accumulation is what shows up on the policy as cash value and what keeps the premium from ever increasing.

Correct answer: Extended term insurance

Extended term insurance uses the accumulated value to continue the same face amount for a limited period, with no further premiums due. That matches an owner who wants the full original death benefit preserved rather than a smaller permanent amount. Texas law requires life policies to make a cash surrender value or a paid-up nonforfeiture benefit available after premiums have been paid for the period stated in the policy (Tex. Ins. Code ch. 1105).

Correct answer: Limited-pay whole life paid up at age 65

Limited-pay whole life compresses premiums into a set number of years or to a stated age, after which the policy is paid up and coverage continues for the insured's life. A policy paid up at age 65 stops the premium obligation exactly when the buyer retires while keeping lifetime protection.

Correct answer: It may pay policy dividends, which are not guaranteed, and the owner generally may take them in cash, apply them to premiums, buy paid-up additions, or leave them to accumulate

A participating whole life policy may pay policy dividends, but dividends are never guaranteed. Owners generally may elect to take them in cash, use them to reduce premiums, buy paid-up additional insurance, or leave them to accumulate. A nonparticipating policy pays no dividends and relies on its guarantees alone.

Correct answer: The amount paid to the beneficiary is reduced by the unpaid loan and the interest on it

The owner may borrow against the whole life policy's cash value, but an unpaid loan and its accrued interest reduce the amount the beneficiary receives at death (Tex. Dep't of Ins. Consumer Pub. CB018, Life Insurance Guide). The policy remains in force; only the proceeds are reduced.

Correct answer: A cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes

The Standard Nonforfeiture Law for Life Insurance requires that, after premiums have been paid for the period stated in the policy, the policy provide a cash surrender value or a paid-up nonforfeiture benefit computed on the basis the statute prescribes (Tex. Ins. Code ch. 1105). In practice this is what makes surrender, reduced paid-up insurance, and extended term insurance available to a whole life owner.

Correct answer: All three are whole life; only the payment period differs, and ordinary whole life has the lowest annual outlay because payments are spread over the longest period

Ordinary, limited-pay, and single-premium designs are all traditional whole life; the only thing that changes is the premium-payment period. Because ordinary whole life spreads payments over the insured's lifetime (to death or the policy's maturity date), it carries the lowest annual outlay of the three. Shortening the paying period raises the premium and speeds cash value growth.

Correct answer: A level premium, a guaranteed death benefit, and a guaranteed cash value

Traditional whole life is permanent coverage defined by three features: a premium level from issue that does not rise with the insured's age, a guaranteed death benefit payable whenever the insured dies while the policy is in force, and a guaranteed cash value that builds inside the contract. The Texas Department of Insurance describes permanent policies of this kind as lifelong protection that also builds cash value the owner can use, in contrast with term insurance covering a limited period.

Correct answer: Because early premiums exceed the current cost of protection, and the insurer holds that overpayment as reserves that later cover the higher cost

The true cost of protecting a life rises each year as the insured ages. The level premium is therefore more than the current cost of protection in the early years and less than it in the later years. The insurer holds that early overpayment as reserves, and that accumulation is what appears on the policy as cash value and what keeps the premium from ever increasing.

Correct answer: A cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes

The Standard Nonforfeiture Law for Life Insurance requires that, after premiums have been paid for the period stated in the policy, the policy provide a cash surrender value or a paid-up nonforfeiture benefit, computed on the basis the statute prescribes. This is why prepaid value in a whole life policy cannot simply disappear on lapse (Tex. Ins. Code ch. 1105).

Correct answer: Reduced paid-up insurance

Reduced paid-up insurance uses the accumulated value to buy a smaller permanent face amount with no further premiums due, which matches an owner who wants lifelong coverage and no more payments and is willing to accept less face amount.

Correct answer: Its annual premium is higher, and its cash value builds faster

Limited-pay whole life compresses the same lifetime cost into fewer years. The shorter the paying period, the higher the annual premium and the faster the cash value grows. Coverage still continues for life after the policy is paid up.

Correct answer: Single-premium whole life

Single-premium whole life is bought with one lump-sum payment that produces a fully paid-up permanent policy, so no further premiums are ever due while lifetime coverage remains in force.

Correct answer: It may pay dividends that are not guaranteed, and owners generally may take them in cash, apply them to premiums, buy paid-up additions, or let them accumulate

A participating policy may pay policy dividends, which are not guaranteed. Owners generally may take them in cash, use them to reduce premiums, buy paid-up additional insurance, or leave them to accumulate. A nonparticipating policy pays no dividends and relies on its guarantees alone.

Correct answer: The unpaid loan and its interest reduce the amount the beneficiary receives; provisions are governed by Tex. Ins. Code ch. 1101

An owner may borrow against a whole life policy's cash value, and an unpaid loan plus its interest reduces the amount the beneficiary receives (CB018). Policy form and provision requirements for life insurance delivered in Texas appear in Tex. Ins. Code ch. 1101, within Title 7, which governs life insurance and annuities generally.