Washington Life Producer Practice Exam

A whole life insurance policy accumulates cash value that becomes what?

1. The policy surrender value

2. The policy loan value which the insured may borrow against

3. The accumulated interest over time

4. The death benefit amount in total

The correct answer is: The policy loan value which the insured may borrow against

A whole life insurance policy accumulates cash value, and this cash value can serve as collateral for a policy loan. This means that the insured has the option to borrow against the accumulated cash value, which remains available as long as the policy is in force. When the policyholder takes out a loan, the amount borrowed will typically accrue interest, but the policy itself continues to accumulate cash value regardless of the loan balance. This option highlights the functionality of whole life policies, where the cash value can provide financial flexibility to the policyholder. It can be used for various purposes, such as funding education, emergencies, or other large expenses. If the loan is not repaid, the outstanding amount will be deducted from the death benefit upon the insured's passing. While the other options present valid concepts related to whole life insurance, they do not directly capture the specific role of cash value in relation to loans. The policy surrender value refers to the amount a policyholder receives if they decide to terminate the policy, which is different from the direct borrowing option associated with cash value. Accumulated interest over time pertains more to the growth of the cash value rather than its usability. Lastly, the death benefit amount is the total amount payable upon death, which does not change