Which of the Following Holds True for Whole Life Insurance

question 67

Multiple Choice

Which of the following holds true for whole life insurance?

• A) Policies cannot be used as collateral.
• B) Premiums are paid for insurance only.
• C) All cash value is returned upon death.
• D) Premiums paid have cash value.

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Definitions:

Effective Interest Method

An accounting practice used to allocate interest expense or income over the life of a financial instrument at a constant interest rate.

Reversing Entries

Journal entries made at the beginning of an accounting period to reverse or cancel out adjusting entries made at the end of the previous period.

Premium on Bonds Payable

Premium on Bonds Payable refers to the amount by which the bond's selling price exceeds its face value or par value.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, represented as an expense on the income statement.