Tennessee Life Producer Practice Exam

What benefit does the renewability feature provide in a term policy?

1. Lower initial premiums

2. The insured can convert to a whole life policy

3. The insured may extend the coverage period

4. Immediate payout of the face amount

The correct answer is: The insured may extend the coverage period

The renewability feature in a term policy allows the insured to extend the coverage period without having to provide evidence of insurability. This means that as the policyholder reaches the end of their term, they have the option to renew the policy for an additional term, typically at an increased premium due to the aging process or the changing risk assessment. This feature is particularly valuable for individuals who may be in poorer health or who may have experienced changes in their life circumstances since the original policy was issued, as it provides a level of continuity and security in their life insurance coverage. In contrast, the other options relate to different aspects of life insurance policies. Lower initial premiums may be a characteristic of term policies in general but are not directly tied to the renewability feature. The ability to convert to a whole life policy is a separate feature that allows for policy conversion but is not inherent in renewability. Immediate payout of the face amount pertains to death benefits, which is a standard feature of most life insurance policies upon the death of the insured, rather than being connected to policy renewability. Thus, focusing on the ability to extend coverage underscores the key benefit of the renewability feature in term life insurance.