A life insurance policy that provides a policyowner with cash value along with a level face amount is called a “Whole Life” insurance policy. Let’s delve into the details of why this answer is correct and why the other options are not.

Whole Life Insurance (Option A – Correct):

Whole life insurance, also known as permanent life insurance, is designed to provide coverage for the entire lifetime of the insured individual. This type of insurance offers both a death benefit (the level face amount) and a cash value component. Here’s why it’s the correct answer:

1. Cash Value Accumulation: Whole life insurance policies have a savings component that accumulates cash value over time. A portion of the premium paid by the policyowner goes into this cash value account, which grows tax-deferred over the years. This cash value can be accessed or borrowed against while the policy is in force, providing a financial cushion for emergencies, investments, or retirement planning.
2. Level Face Amount: Whole life insurance provides a fixed or level death benefit. This means that the amount paid to the beneficiary upon the insured’s death remains the same throughout the life of the policy, as long as premiums are paid. This predictability can be valuable for estate planning or ensuring financial stability for loved ones.
3. Lifetime Coverage: Whole life insurance covers the policyholder for their entire life, as long as the premiums are paid. There is no expiration date on the coverage, which makes it suitable for individuals who want permanent protection and peace of mind.
4. Premium Stability: Premiums for whole life insurance policies typically remain level for the life of the policy. This can be advantageous because the policyowner doesn’t have to worry about premium increases as they age, unlike term insurance where premiums can significantly rise upon renewal.

Now, let’s explore why the other options are not correct:

b) Level Term (Option B – Incorrect):

Level term insurance provides a level death benefit for a specified term, such as 10, 20, or 30 years. It does not accumulate cash value. Premiums for level term insurance remain constant during the term, but they can increase significantly when the term ends and the policyholder seeks to renew. Unlike whole life, it does not offer lifetime coverage or cash value accumulation.

c) Credit Life (Option C – Incorrect):

Credit life insurance is a type of insurance that covers a specific debt, such as a mortgage, personal loan, or credit card balance, in case the borrower dies. It is typically offered by lenders to borrowers as a way to pay off the outstanding debt in the event of the borrower’s death. Credit life insurance does not provide cash value or a level face amount unrelated to the specific debt it covers.

d) Ordinary Life (Option D – Incorrect):

The term “ordinary life” is often used interchangeably with “whole life” insurance, and it can be a source of confusion. However, the more commonly used term is “whole life.” Both refer to permanent life insurance policies that offer a level death benefit and cash value accumulation. The difference in terminology is mainly historical, and “whole life” is the preferred term used in the insurance industry today.

In summary, the correct answer is “a) Whole Life” because it uniquely combines the features of a level face amount, cash value accumulation, lifetime coverage, and stable premiums. The other options (b) Level Term, (c) Credit Life, and (d) Ordinary Life do not provide this specific combination of features and are distinct types of insurance policies with different purposes and characteristics.