Primerica Life Producer Practice Test

What is a common feature of endowment policies?

1. Long term coverage

2. Higher premium for cash value

3. Only covers accidental death

4. Provides no cash value

The correct answer is: Higher premium for cash value

Endowment policies are designed to pay a lump sum either on a specific date (the endowment maturity date) or upon the death of the insured, if it occurs before that date. A defining characteristic of endowment policies is that they often accumulate a cash value over time, which makes them an attractive option for individuals looking to provide financial security for their beneficiaries while also saving for a specific goal, such as funding a child's education or retirement. The reason why the choice indicating a higher premium for cash value is accurate is that, in general, endowment policies require higher premiums compared to term life insurance. This is primarily because they provide both a death benefit and a cash value component. The cash value builds over time and is accessible to the policyholder during their lifetime. Therefore, the elevated premium reflects the additional benefits provided, distinguishing endowment policies from other types of life insurance that may not offer such cash value features. In contrast, the other options either describe features that are not characteristic of endowment policies or misrepresent how these policies function.