Oklahoma Life Producer Practice Exam

Which type of whole life policy provides immediate cash value?

1. Annual premium policy

2. Single premium policy

3. Limited pay policy

4. Endowment policy

The correct answer is: Single premium policy

A single premium policy is designed to provide immediate cash value because the entire premium is paid upfront in a lump sum. This instant payment creates an immediate cash value component, allowing the policyholder access to funds if needed shortly after purchasing the policy. In the case of a single premium policy, since the premium is fully paid up front, the cash value accumulates right away, differentiating it from other types of whole life policies that usually require ongoing premium payments before any significant cash value is generated. This cash value is part of the policy's value, which increases over time, but in a single premium policy, that growth begins from the outset rather than requiring years of paying premiums. Understanding this structure highlights why this type of policy is valued for its quick access to cash value, making it an attractive choice for some individuals seeking immediate benefits from their life insurance investment.