Which of the following are true of ordinary whole-life insurance policies?
1. The insured pays premiums on this type of insurance until his death.
2. Ordinary whole life insurance covers the insured for the states term of the policy.
3. The insured only has to pay on this type of policy for a certain number of years.
4. Ordinary whole life insurance has some value as an investment.
Thank you for the help in advance. this is the only problem that i just cannot figure out.
1. is the correct answer. Although whole life policies have cash value, it is less than the money put in, and should not be considered an investment. So I would not pick 4.
2. and 3. are just plain wrong.
Thank You SO Much! :)
Of the options provided, the following statements are true of ordinary whole-life insurance policies:
1. The insured pays premiums on this type of insurance until his death.
4. Ordinary whole life insurance has some value as an investment.
Explanation:
1. Ordinary whole-life insurance policies require the insured to pay premiums until their death. This ensures that coverage remains in effect until the insured passes away.
2. This statement is not true. Ordinary whole-life insurance policies provide coverage for the insured's entire life, as long as premiums are paid. There is no specific term for the coverage.
3. This statement is not true. The insured is typically required to pay premiums throughout their lifetime, rather than only for a certain number of years.
4. Ordinary whole-life insurance policies contain a savings component that accumulates cash value over time. This cash value can be withdrawn or borrowed against, making it an investment of sorts.
Therefore, statements 1 and 4 are true for ordinary whole-life insurance policies.
To determine which of the statements are true about ordinary whole-life insurance policies, we'll analyze each statement individually:
1. The insured pays premiums on this type of insurance until his death.
Explanation: This statement is true. In ordinary whole-life insurance policies, the insured is required to pay premiums until their death. These premiums are typically of a fixed amount and paid on a regular basis, such as monthly or annually.
2. Ordinary whole life insurance covers the insured for the stated term of the policy.
Explanation: This statement is incorrect. Ordinary whole-life insurance policies do not have a specific term or expiration date like term life insurance policies. Instead, the coverage lasts for the entire lifetime of the insured, as long as the premiums are paid.
3. The insured only has to pay on this type of policy for a certain number of years.
Explanation: This statement is incorrect. Unlike term life insurance policies, where the insured needs to pay premiums for a specific period of time, ordinary whole-life insurance policies require the insured to continue paying premiums throughout their lifetime.
4. Ordinary whole life insurance has some value as an investment.
Explanation: This statement is true. Ordinary whole-life insurance policies often accumulate a cash value over time. As the policyholder pays premiums, a portion of the premium goes toward the insurance coverage, while the remainder accumulates as cash value. This cash value can be borrowed against or withdrawn by the policyholder during their lifetime, providing an investment or savings component to the policy.
So, in summary, the true statements about ordinary whole-life insurance policies are:
- The insured pays premiums on this type of insurance until their death.
- Ordinary whole life insurance has some value as an investment.