A level term life policy is characterized by:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Level term insurance provides a stated face amount that remains constant and a premium that is level (flat) for the entire term period, such as 10, 20, or 30 years. The level premium averages the increasing cost of insurance over the term, charging more than current mortality cost in the early years and less later. This distinguishes it from yearly renewable term (premium increases at each renewal), convertible term (includes a conversion feature to permanent coverage), and decreasing term (face amount declines over time, commonly used for mortgage protection).
Why the other options are wrong
- B) Increasing premiums with age describe yearly renewable term or other annually repriced designs. Level term insurance, by contrast, fixes the premium for the entire term period and does not increase it each year.
- C) Automatic conversion at the end of the term is not a level term feature. Conversion is an optional right found in convertible term policies and is exercised during a stated conversion period.
- D) A decreasing death benefit describes decreasing term insurance, typically used to match a declining mortgage or loan balance. Level term keeps both the face amount and premium flat for the term.
Memory hook
Level term = set it and forget it. Flat premium and flat face amount, locked in for the whole term.