Tennessee Insurance Practice Exam

Which policy allows for flexibility in premiums and death benefit amounts?

1. Term Life Policy

2. Whole Life Policy

3. Universal Life Policy

4. Fixed Premium Life Policy

The correct answer is: Universal Life Policy

The correct answer is the Universal Life Policy, which is designed to offer policyholders significant flexibility in both premium payments and death benefit amounts. This type of life insurance allows the insured to adjust their premium payments within certain limits, meaning they can increase or decrease their payments depending on their financial situation. Additionally, Universal Life Policies typically allow policyholders to modify the death benefit amount. They can choose to increase the death benefit but may need to provide evidence of insurability or pay higher premiums for any increased coverage. This flexibility makes Universal Life Policies particularly attractive for individuals who anticipate changes in their financial needs over time. In contrast, other types of policies like Term Life, Whole Life, and Fixed Premium Life policies generally have fixed premiums and death benefits. Term Life provides coverage for a specific period with a set death benefit, Whole Life features unchanging premiums and a guaranteed death benefit, while Fixed Premium Life usually entails consistent premium payments without any variance in benefits or payment structure. Therefore, neither of these options provides the flexibility that Universal Life offers.