West Virginia State Life Insurance Practice Exam

Which life insurance option usually requires lower initial premiums compared to whole life insurance?

1. Term Life Insurance

2. Convertible Term Life Insurance

3. Joint Life Insurance

4. Endowment Life Insurance

The correct answer is: Term Life Insurance

Term life insurance typically requires lower initial premiums compared to whole life insurance because it is designed to provide coverage for a specified period, known as the term, without accumulating cash value. Whole life insurance, on the other hand, provides lifelong coverage and incorporates a savings component, which contributes to higher premium costs. With term life insurance, the policyholder pays for the death benefit only, with no savings or investment element, making it a more affordable option. This structure makes term life insurance a popular choice for those seeking inexpensive coverage, particularly during specific periods such as raising children or while paying off a mortgage. In contrast, the other types of life insurance listed may also have specific benefits and features, but they generally do not offer the lower initial premiums associated with term life insurance. For instance, convertible term life insurance allows the policyholder to convert to a whole life policy at some point, which can lead to increased premiums over time. Joint life insurance covers two individuals under a single policy, usually resulting in a higher premium due to the added risk, while endowment life insurance provides a death benefit along with a savings component, similar to whole life insurance, leading to higher costs.