Question

Cash values within an ordinary straight whole life insurance policy _______ over time.

Answer 1

Answer:

Increase

Explanation:

Whole Life Insurance Policy represents a life insurance policy that runs through the lifetime of the insured based on either the payments of pre-determined premiums or arrival at the date of maturity. The policy which is also referred to as 'straight or ordinary life' represents a contract between the insured and the insurer. The insurer pays the guaranteed sum or cash values to the insured's beneficiaries at the death of the insured or maturity of the policy.

As compared to another type of life insurance which is the termed life insurance, Whole Life Insurance should provide increasing cash values overtime on the policy. This is because aside the fixed cash value which goes along with the premium the insured pays regularly there  is the accumulation of interest credited by the insurer based on pre-agreed terms to the cash value which is to be paid at maturity. The advantage as well as the fact that the tax treatment of these credited interests is quite favourable as they are tax-free. This benefit accumulates when insurance is greater than ten to fifteen years.

Hence, the cash value of the whole life insurance policy is expected to increase over time as a result of the accumulation of tax-free interests/dividends along with side the predetermined cash value.