Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A $200,000 level term policy with a 20-year term would charge premiums that:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Level term insurance provides a level face amount for a stated term — here 20 years — in exchange for a level premium that does not change during the term. The level premium is set at issue by averaging the annually increasing cost of insurance across the term, so the insurer overcharges the early years and undercharges the later ones. Because term insurance is pure protection with no cash value component, premiums do not decline with any savings element, and a single premium at issue describes a single-premium contract, not a level-term policy.
Why the other options are wrong
- B) Premiums that increase every year are the signature of annual renewable term, where the cost of insurance rises with age. Level term keeps the premium flat for the entire term.
- C) Term insurance is pure protection and builds no cash value, so there is no savings element whose growth could lower the premium during the term.
- D) A single premium paid at issue describes a single-premium contract, not level term. Level term spreads the cost evenly across the full term with level payments.
Memory hook
Level term: one flat price for the whole ride; the insurer banks early years to pay later ones.