Question 34

Premium stays level for the term

Level-premium term life insurance is characterized by a consistent premium amount that does not change throughout the duration of the policy. This means that the policyholder pays the same premium from the start to the end of the term.

A) Premium increases each year

This option is incorrect as level-premium term life insurance is specifically designed to avoid annual premium increases. Instead, the premium remains constant for the entire term, providing predictability in cost for the policyholder.

B) Death benefit decreases each year

This option is also incorrect. In a level-premium term life insurance policy, the death benefit remains the same for the duration of the term and does not decrease. A decreasing death benefit is more characteristic of certain types of other life insurance products, such as decreasing term insurance.

C) Premium stays level for the term

This statement accurately describes level-premium term life insurance. The defining feature of this type of policy is that the premium amount is fixed and does not change over the life of the policy term, allowing for easier financial planning by the insured.

D) Cash value accumulates rapidly

This option is incorrect because level-premium term life insurance does not accumulate cash value. Cash value accumulation is a feature of permanent life insurance products, not term life insurance, which is focused solely on providing a death benefit without a savings component.

Conclusion

The correct answer, "Premium stays level for the term," highlights the key feature of level-premium term life insurance, ensuring that policyholders have a stable premium payment throughout the policy's duration. All other options fail to accurately describe this type of insurance, focusing instead on characteristics that apply to different insurance products.