South Carolina Life Insurance Practice Exam

What is the characteristic of a renewable term life insurance policy?

1. It can be converted to permanent insurance

2. It has an increasing premium each renewal

3. It automatically renews without evidence of insurability

4. It terminates after a set period

The correct answer is: It automatically renews without evidence of insurability

A renewable term life insurance policy is designed with the feature that allows the policyholder to renew the coverage at the end of each term without the need to provide evidence of insurability. This means that the insurer cannot deny renewal based on health changes that the policyholder may experience during the initial term. This characteristic is particularly beneficial because it provides continued protection even if the insured's health worsens, allowing them to maintain their coverage without undergoing another medical evaluation or risk assessment. While other options present various characteristics related to life insurance policies, they do not capture the essence of what makes a renewable term life insurance policy distinct. For example, the possibility of conversion to permanent insurance pertains more specifically to convertible term policies rather than the renewable aspect. Increasing premiums may occur in certain policies, but renewable term policies typically allow a specified renewal period where premiums may not necessarily increase each time. Lastly, while policies do indeed have terms, the key characteristic of renewal without evidence of insurability is what highlights the unique feature of renewable term insurance.