PSI Ohio Insurance Practice Exam

What is a characteristic of an increasing term life insurance policy?

1. It starts with a high level of coverage

2. It begins with little or no insurance protection

3. It provides a guaranteed death benefit

4. It allows for premium refunds

The correct answer is: It begins with little or no insurance protection

An increasing term life insurance policy is designed to provide a death benefit that increases over time. It typically begins with a relatively low amount of insurance protection, which aligns with the option indicating that it starts with little or no insurance. This approach can make the policy more affordable at the outset; as time progresses, the coverage amount rises, aligning with an example of growing financial needs or inflation. Conversely, a policy starting with a high level of coverage would not fit the increasing term model, as it is designed specifically to kick off with lower coverage that gradually increases. While a guaranteed death benefit and premium refunds may be features of other types of policies, they are not inherent characteristics of increasing term life insurance. Also, the focus here is on the gradual growth of coverage rather than a substantial initial payout.