PSI Life Exam Practice Test 2025 - Free Life Insurance Exam Questions and Study Guide

Whole life insurance policies are indeed characterized by their higher premiums compared to term life policies. This is primarily due to the fact that whole life insurance provides coverage for the entire lifetime of the insured, as opposed to a specific term. Additionally, whole life policies build cash value over time, which is not a feature of term life insurance. The premium payments in whole life insurance reflect not only the cost of insurance for life coverage but also contribute to the savings component, which leads to the policy's cash value accumulation. This combination of lifelong coverage and cash value growth results in the higher premium costs associated with these policies.

In contrast, term life insurance is generally much more affordable because it provides coverage for a limited period and does not accumulate cash value. Therefore, the statement regarding higher premiums aligns perfectly with the key attributes of whole life insurance policies.