Which of the Following Represents a Disadvantage of a Whole

question 80

Multiple Choice

Which of the following represents a disadvantage of a whole life insurance policy?

• A) It is difficult to evaluate the true cost of a whole life insurance policy at the time of purchase.
• B) A whole life insurance policy provides only temporary coverage for a set period.
• C) A whole life insurance policy may require a policyholder to pay higher premiums when the policy is renewed.
• D) A whole life insurance policy often provides lower yields than other investment vehicles.
• E) A whole life insurance policy does not provide any tax advantages on accumulated earnings.

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Definitions:

Compounded Annually

Refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods on an annual basis.

Lump Sum Payment

A single payment made at a particular time, as opposed to several smaller payments or installments.

Compounded Annually

A method of calculating interest where the interest earned over a period is added to the principal, and the total becomes the base for the calculation of the next period's interest.

Lump Sum Payment

A payment made in a single lump sum amount, often used in the context of paying off debts or settling transactions.