Tennessee Life Producer Practice Exam

Which type of life insurance policy has a death benefit that adjusts periodically?

1. Whole Life

2. Decreasing Term

3. Universal Life

4. Variable Life

The correct answer is: Decreasing Term

The type of life insurance policy that features a death benefit that adjusts periodically is Decreasing Term insurance. This type of policy is specifically designed to provide coverage that decreases over time, typically in alignment with a corresponding financial obligation, such as a mortgage. The decreasing death benefit reflects the diminishing risk exposure to the insurer as the insured's debt or financial responsibility decreases. In contrast, Whole Life insurance provides a fixed death benefit and builds cash value over time, while Universal Life offers flexibility in premiums and benefits but does not inherently include periodic adjustments to the death benefit. Variable Life insurance allows policyholders to invest the cash value in different investments, with the death benefit varying based on those investments' performance, but it does not have a built-in mechanism for periodic adjustments like Decreasing Term insurance.