South Carolina Life Insurance Practice Exam

What distinguishes an adjustable life insurance policy?

1. Fixed premium payments

2. Flexible premium payments

3. No cash value

4. Lifetime coverage only

The correct answer is: Flexible premium payments

An adjustable life insurance policy is distinguished by its flexible premium payments. This flexibility allows policyholders to adjust their premium amounts, which can change based on their financial circumstances or needs. Such policies enable the insured to increase or decrease their premium payments and adjust their death benefit, depending on their current situation. This adaptability is one of the key features that appeals to individuals who anticipate changing financial needs over time, making adjustable life insurance a versatile option. In contrast, fixed premium payments typically characterize whole life insurance policies, which maintain the same premium throughout the life of the policy. No cash value is not a feature of adjustable life insurance policies, as they do accrue cash value over time based on the premiums paid. Lifetime coverage is also not exclusive to adjustable life, as many types of life insurance can offer this benefit. The unique aspect of flexible premium payments sets adjustable life insurance apart, allowing policyholders greater control over their premiums and coverage.