PSI Ohio Insurance Practice Exam

In a life insurance policy, what does the "level" in level term life policy signify?

1. The premiums remain the same for the policy term.

2. The death benefit remains constant throughout the term.

3. The policy provides a lump sum payment at a specific age.

4. The cash value accumulates at a constant rate.

The correct answer is: The death benefit remains constant throughout the term.

In a level term life insurance policy, the term "level" specifically indicates that the death benefit remains constant throughout the policy term. This means that if the insured passes away during the coverage period, their beneficiaries will receive the same predetermined death benefit amount, regardless of when the death occurs within that term. This feature is key to level term life insurance, as it provides certainty and peace of mind that the financial support for the beneficiaries will not fluctuate over time. Other options address aspects of life insurance but do not pertain to what the "level" specifically refers to in this context. For example, while it is true that in most level term policies, the premiums might also remain consistent throughout the policy term, the primary focus of the term "level" is on the death benefit. Additionally, the option about providing a lump sum payment at a specific age does not apply to term life insurance, as that aspect is more aligned with whole life policies or certain types of endowment policies. Lastly, cash value accumulation is a characteristic of permanent life insurance, rather than term insurance, which typically does not build cash value.