South Carolina Life Insurance Practice Exam

Which component of an adjustable life policy can be modified by policy owners?

1. Premium payment frequency

2. Face Amount

3. Beneficiary designation

4. Investment options

The correct answer is: Face Amount

In an adjustable life policy, one of the key features is the flexibility it offers to policy owners in managing their insurance needs. The face amount is the amount that will be paid out upon the death of the insured, and policy owners have the ability to modify this amount based on their changing insurance requirements. This flexibility allows them to increase or decrease the death benefit, which can align with their financial goals or responsibilities over time. For instance, if a policy owner experiences a life event such as marriage or the birth of a child, they might choose to increase the face amount to ensure adequate coverage for their family's future needs. Conversely, if their financial situation changes and they find it necessary to reduce the amount of coverage, they can do so as well. This adaptability is one of the advantages of adjustable life policies, making it a suitable choice for individuals who anticipate changes in their insurance needs over time. The other components mentioned, while relevant to the policy, do not possess the same level of modifiability inherent to the face amount. Premium payment frequency and beneficiary designation, for example, typically have set parameters that can be changed but are not as central to the concept of adjustability within the policy's fundamental structure. Investment options, also available in some adjustable life