Which statement accurately compares term life and whole life insurance?

• A. Whole life premiums increase over time.
• B. Term life covers defined period with level premiums and generally no cash value; Whole life provides lifetime coverage with cash value and level premiums.
• C. Term life has cash value.
• D. Whole life has no cash value.

Answer: (B)

Understanding the difference between term and whole life hinges on how long the coverage lasts, how premiums behave, and whether a cash value builds up. Term life provides protection for a defined period. During that term, premiums are typically level, and the policy generally has no cash value, so it’s pure protection for that specified time. If the term ends, coverage may end or require a renewal at a higher rate, without any built-up cash value.

Whole life, on the other hand, is a permanent policy: it aims to provide lifetime coverage as long as premiums are paid. The premiums are also level for life, and a cash value grows over time, which can be borrowed against or borrowed from, or surrendered for cash, depending on the policy.

So the statement that term life covers a defined period with level premiums and generally no cash value, while whole life provides lifetime coverage with cash value and level premiums, accurately captures the main differences between these two types of life insurance.