61. Which of the following is TRUE of a 10-year level term life insurance policy with a face amount of $100,000?
Answer: A
The premium and the face amount will remain constant for the 10-year period.
A 10-year level term life insurance policy guarantees that both the premium and the face amount will remain constant throughout the entire 10-year term. This stability is a key feature of level term policies, making it easier for policyholders to budget for their insurance costs.
A) The premium and the face amount will remain constant for the 10-year period.
This option is correct because a 10-year level term life insurance policy is specifically designed to maintain the same premium and face amount for the duration of the term. This predictability is one of the primary advantages of this type of policy, allowing policyholders to have consistent coverage without any fluctuations in cost or benefit.
B) The face amount will remain constant as the premium increases over the 10-year period.
This option is incorrect. In a 10-year level term policy, the face amount does not change, and the premium is also fixed for the term. If the premium were to increase, it would contradict the fundamental characteristics of a level term policy, which is designed to provide stability in both cost and coverage.
C) The policy will be converted to a whole life policy at the end of the 10-year period.
This option is incorrect as well. A 10-year level term policy does not automatically convert to a whole life policy at the end of the term unless there is a specific conversion option included in the policy. Generally, without such an option, the term policy simply expires, and the coverage ends unless renewed or converted separately.
D) The face amount will increase as dividends on the policy accumulate over the 10-year period.
This option is also incorrect. Term life insurance policies, including 10-year level term policies, do not accumulate cash value or dividends like whole life policies do. The face amount remains fixed and does not increase over the term, as there are no dividends involved in term insurance.
Conclusion
Option A is definitively correct because it accurately reflects the nature of a 10-year level term life insurance policy, which keeps both the premium and face amount constant throughout the term. All other options fail to represent the characteristics of this type of policy, either suggesting changes in premium or face amount that do not occur in a standard level term agreement.