Difficulty: Medium

Average Score: 50%

Which of the following is TRUE of a 10-year level term life insurance policy with a face amount of $100,000?

Rationale

The premium and the face amount will remain constant for the 10-year period.

In a 10-year level term life insurance policy with a face amount of $100,000, both the premium paid by the policyholder and the face amount of the policy will remain fixed and unchanged throughout the entire 10-year duration.

B (The face amount will remain constant as the premium increases over the 10-year period.) YOUR ANSWER

This statement is incorrect because in a level term life insurance policy, both the premium and the face amount remain constant over the specified term. There is no increase in the premium amount during the 10-year period.

C (The policy will be converted to a whole life policy at the end of the 10-year period.) YOUR ANSWER

This option is incorrect as it describes a feature that is not typically associated with a 10-year level term life insurance policy. Such policies do not automatically convert to whole life policies at the end of the term.

D (The face amount will increase as dividends on the policy accumulate over the 10-year period.) YOUR ANSWER

This choice is incorrect because dividends accumulating over time to increase the face amount of the policy is a characteristic more commonly seen in participating whole life insurance policies, not in a 10-year level term policy.

Conclusion

In a 10-year level term life insurance policy with a face amount of $100,000, the premium paid by the policyholder and the face amount of the policy will both remain constant throughout the entire 10-year period. This stability in premiums and benefits is a defining feature of this type of insurance, providing a straightforward and predictable coverage structure for the policyholder over the specified term.

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