Life License Qualification Program (LLQP) Practice Exam

Which type of coverage can vary in amount and require a lower premium than a whole life policy?

1. Term life insurance

2. Universal life insurance

3. Endowment policies

4. Whole life insurance

The correct answer is: Term life insurance

The option indicating term life insurance stands out as the appropriate choice because term life insurance is designed to provide coverage for a specific period of time, such as 10, 20, or 30 years. The amount of coverage can vary based on the policyholder's needs, making it flexible in that regard. Additionally, term life insurance usually comes with a lower premium compared to whole life insurance. Whole life insurance includes a savings component and guarantees coverage for the insured's lifetime, resulting in higher premiums due to the additional benefits it provides, such as cash value accumulation. In contrast, universal life insurance offers flexible premiums and death benefits but still tends to be more complex and often has higher costs associated with policy management than term insurance. Endowment policies have a set benefit at maturity or upon death, made to enforce savings alongside insurance, usually leading to higher premiums as well. Therefore, term life insurance is the best fit for the criteria given in the question relating to varying amounts of coverage and lower premium costs compared to whole life insurance.