Arizona Life and Health Practice Exam

What improvement does an individual expect when purchasing a modified life insurance policy?

1. Lower premium costs

2. An increase in death benefits

3. An improvement in future income

4. Immediate cash access

The correct answer is: An improvement in future income

When an individual purchases a modified life insurance policy, they expect an improvement in future income due to the policy's structure. Modified life insurance is designed to provide lower initial premiums for the first few years, which then increase to a set amount thereafter. This arrangement allows individuals to free up funds in the early years to meet other financial obligations or invest. The key benefit is that, as premiums increase in the long run, the policy accumulates cash value, which the policyholder can access later, potentially providing a source of income. Additionally, over time, as the policy matures, individuals may benefit from dividends or interest, further enhancing their financial situation in the future. Other options may offer different benefits, such as lower premium costs initially, but do not directly correlate with an expectation of improved future income in the same manner. Similarly, while death benefits might be a consideration, they are generally not the primary expectation linked to modified life policies compared to the financial planning aspect related to income over time. Immediate cash access is also not typically associated with modified life insurance, as this type usually focuses on longer-term benefits rather than short-term liquidity.