Arizona Life and Health Practice Exam

When a ten year renewable term life insurance policy is renewed at age 55, what will be the basis for the premium rate?

1. Current rate for a 45-year-old

2. Current rate for a 50-year-old

3. Current rate for a 55-year-old

4. Current rate for a 65-year-old

The correct answer is: Current rate for a 55-year-old

The premium rate for a renewed ten-year renewable term life insurance policy is based on the insured's current age at the time of renewal. When the policy is renewed at age 55, the insurance company will calculate the premium using the rates applicable to a 55-year-old. This is due to the nature of renewable term insurance, which allows the policyholder to renew their coverage without the need for additional medical underwriting but considers the insured's age for premium determination. As individuals age, the risk associated with insuring them generally increases, leading to higher premiums. Therefore, it is standard practice for insurers to adjust premiums according to the insured's age at the point of renewal rather than the original age or some other arbitrary age. This reflects the increasing likelihood of claims as one gets older, ensuring that the insurance company can adequately cover potential future liabilities.