Types of Life Policies — Insurance Producer — Life & Health Practice Test
34 questions in this topic · 30 drawn at random this round
A term life insurance policy pays a $200,000 death benefit if the insured dies at any point in the 20-year period, and that face amount never changes during the term. What type of term insurance is this?
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This Insurance Producer — Life & Health Types of Life Policies practice set has 34 practice questions based on the official exam materials, each with an instant explanation.
Sample questions
Three questions from the Types of Life Policies bank with the correct answer and an explanation. The practice quiz above draws 30 questions at random from the same bank.
A term life insurance policy pays a $200,000 death benefit if the insured dies at any point in the 20-year period, and that face amount never changes during the term. What type of term insurance is this?
- Level term — the face amount (and typically the premium) stays the same for the entire stated term. — Correct answer
- Decreasing term — the face amount steadily declines over the term.
- Increasing term — the face amount steadily rises over the term.
- Annually renewable term — the face amount resets to a new random value each year.
Explanation: Level term insurance provides a guaranteed fixed (level) amount of coverage for a stated period; the death benefit does not change from the first day of the term to the last, which distinguishes it from decreasing or increasing term.
Handbook: Types of Life Policies — Term Life: Level Term
A term life policy's death benefit is highest in year one and gradually shrinks to zero by the end of the term, while the premium stays level throughout. What is this type of policy, and what is it commonly used for?
- Decreasing term — commonly used to cover an obligation that itself declines over time, such as a mortgage or other amortizing loan balance. — Correct answer
- Increasing term — commonly used to keep pace with inflation over a long time horizon.
- Single-premium whole life — commonly used to prefund final expenses in one lump sum.
- Variable universal life — commonly used to fund a separate-account securities investment.
Explanation: Decreasing term insurance provides a death benefit that declines according to a schedule (often to match a shrinking loan balance) while the premium generally remains level for the term. It is frequently used to protect a mortgage or other declining debt.
Handbook: Types of Life Policies — Term Life: Decreasing Term
Which of the following best describes an increasing term life insurance policy?
- A term policy whose death benefit rises over the life of the contract, typically to help the coverage keep pace with inflation or growing financial obligations. — Correct answer
- A term policy whose death benefit falls each year to zero, matching a shrinking loan balance.
- A term policy that automatically converts to whole life at the end of the term without new evidence of insurability.
- A term policy that returns all premiums paid to the owner if the insured is still alive at the end of the term.
Explanation: Increasing term insurance is structured so the face amount grows over time (often tied to a cost-of-living or fixed-percentage schedule), addressing the concern that a level death benefit loses purchasing power over a long term. Premiums are usually adjusted upward to reflect the growing amount at risk.
Handbook: Types of Life Policies — Term Life: Increasing Term