Arizona Life and Health Practice Exam

What is an advantage of purchasing term life insurance?

1. The initial premium is lower compared to whole life coverage

2. It has a cash surrender value

3. Premiums are guaranteed never to increase

4. It provides lifelong coverage

The correct answer is: The initial premium is lower compared to whole life coverage

One key advantage of purchasing term life insurance is that the initial premium is typically lower compared to whole life coverage. This affordability makes term life insurance an attractive option for individuals who want to secure coverage without a significant immediate financial burden. Since term life insurance is designed to provide protection for a specific period (such as 10, 20, or 30 years), it does not build cash value like whole life policies do. This results in lower premiums, allowing policyholders to obtain a higher death benefit for a lower cost, especially beneficial for those who may need substantial coverage during critical life stages like raising children or paying off a mortgage. The other options relate to features that are characteristic of whole life insurance or other permanent policies, which are not applicable in the context of term life insurance. For instance, term life does not have a cash surrender value, which is a major feature of whole life policies. Also, while some term policies have guaranteed premiums for a certain period, they may not guarantee that premiums will never increase over the term or upon renewal. Additionally, term life insurance does not provide lifelong coverage, as it is designed to expire at the end of the specified term. These differences highlight why the lower initial premium is a standout benefit for many consumers