Life License Qualification Program (LLQP) Practice Exam

What type of policy does D need for temporary coverage at the lowest possible premium?

1. Limited-Pay Life

2. Graded Premium

3. Level Term

4. Endowment

The correct answer is: Level Term

For temporary coverage at the lowest possible premium, a level term policy is the most suitable option. Level term life insurance provides a set amount of death benefit coverage for a specific period, typically ranging from one to thirty years, with premiums that remain constant throughout the term. This predictability and lower cost make it ideal for individuals seeking affordable temporary coverage, such as to provide financial protection during key life stages, like raising children or paying off a mortgage. In contrast, limited-pay life policies typically require higher premiums because the policyholder is paying in a limited time frame for a lifetime of coverage. Graded premium policies start with lower premiums that increase over time, which may not be the best choice for anyone seeking the lowest initial cost. Endowment policies, which provide a death benefit if the insured dies within the policy term or a return of premiums at the end of the term, generally have higher premiums compared to level term life insurance because they combine both insurance and an investment component. Thus, when considering the need for temporary coverage while minimizing costs, a level term policy stands out as the most appropriate choice.