What is a common feature of permanent life insurance policies?

What is a common feature of permanent life insurance policies?

• A. They provide coverage for a limited time
• B. They have a cash value component
• C. They require annual renewals
• D. They typically have lower premiums than term policies

Answer: (B)

Permanent life insurance policies are designed to provide lifelong coverage, differentiating them from term life insurance, which is limited to a specified period. A key feature of permanent life insurance is the inclusion of a cash value component. This cash value accumulates over time as the premiums are paid, allowing policyholders to borrow against it or withdraw funds under certain conditions. The cash value grows on a tax-deferred basis, providing potential financial benefits during the policyholder's lifetime. In contrast, options that suggest coverage for a limited time, require annual renewals, or imply that permanent policies generally have lower premiums do not accurately characterize permanent life insurance. Instead, these aspects are more aligned with term life insurance, which offers lower initial premiums but does not build cash value or provide coverage for life without renewal.

Permanent life insurance policies are designed to provide lifelong coverage, differentiating them from term life insurance, which is limited to a specified period. A key feature of permanent life insurance is the inclusion of a cash value component. This cash value accumulates over time as the premiums are paid, allowing policyholders to borrow against it or withdraw funds under certain conditions. The cash value grows on a tax-deferred basis, providing potential financial benefits during the policyholder's lifetime.

In contrast, options that suggest coverage for a limited time, require annual renewals, or imply that permanent policies generally have lower premiums do not accurately characterize permanent life insurance. Instead, these aspects are more aligned with term life insurance, which offers lower initial premiums but does not build cash value or provide coverage for life without renewal.