Term vs. Whole Life for the CA 2-15 Exam

Term life: protection with an expiration date

Term life is pure death protection for a set period — 10, 20, 30 years, or to a stated age. If the insured dies during the term, the beneficiary receives the face amount. If the insured outlives the term, the policy simply ends: no payout, no refund (unless it was return-of-premium term, which the exam treats as its own animal).

Because the insurer is only ever on the hook during the term, premiums are the lowest of any life policy for the same face amount. That is the trade: maximum coverage per dollar, zero accumulation.

• No cash value — nothing to borrow against, nothing to surrender
• Level, decreasing, or increasing term variations describe the FACE AMOUNT, not the premium
• Renewable = can continue without new proof of insurability (at a higher, attained-age premium)
• Convertible = can exchange for permanent coverage without evidence of insurability

Whole life: permanent coverage that builds cash value

Whole life covers the insured to age 100 (traditionally) with level premiums and a guaranteed death benefit. Part of each premium funds a cash value that grows tax-deferred on a guaranteed schedule — at age 100 the cash value equals the face amount ("endows").

The cash value is the exam’s obsession. It belongs to the policyowner: it can be borrowed against, used to buy paid-up insurance, or taken on surrender. But a loan is not a withdrawal — unpaid loans plus interest reduce the death benefit.

• Level premium: overpay in early years, underpay later — the cash value is the balance
• Loans reduce the DEATH BENEFIT if unpaid; they do not stop cash value growth on the remainder
• Nonforfeiture options (cash surrender, reduced paid-up, extended term) exist BECAUSE there is cash value
• Participating policies may pay dividends — which are a return of premium, not taxable income

The traps the exam sets

Most missed questions swap two pairs of concepts. First: face amount vs. cash value — beneficiaries get the face amount (minus outstanding loans); owners access the cash value. Second: renewable vs. convertible — renewable extends term coverage, convertible exchanges it for permanent coverage; both skip new underwriting, which is why questions blur them.

Also watch scenarios: "needs maximum coverage for 20 years at lowest cost" is always term. "Wants lifetime coverage with forced savings" is whole life. The exam rewards matching the tool to the need, not reciting definitions.