South Carolina Insurance Practice Exam

Krissa purchases a 10-year level term life insurance policy that has a death benefit of $200,000. Which of these statements is true?

1. The death benefit will decrease over time

2. The premium will increase after 5 years

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

4. The policy cannot be renewed after 10 years

The correct answer is: The face amount and premium will remain constant over the 10-year period

In a 10-year level term life insurance policy, both the death benefit and the premium remain constant throughout the defined term of the policy, which in this case is 10 years. This means that if Krissa were to pass away at any point during that 10-year period, her beneficiaries would receive a death benefit of $200,000, and she would pay the same premium each year for the entire duration of the policy. The stability of both the death benefit and the premium is a critical characteristic of level term policies, providing individuals with predictable costs and financial protection over the term without worrying about fluctuating premiums or a decreasing benefit. This predictability helps individuals plan their finances with the knowledge that their insurance coverage remains unchanged over the specific period, ensuring that their loved ones receive a consistent benefit if something were to happen. Renewability and potential changes in premiums are factors, but in the case of this specific policy, those do not impact the correctness of the provided statement regarding the death benefit and premium stability.