Utah Life Producer Practice Exam

Which type of policy typically requires lower premiums compared to others?

1. Whole life policy

2. Universal life policy

3. Term life policy

4. Variable life policy

The correct answer is: Term life policy

Term life insurance typically requires lower premiums compared to other types of life insurance policies. This is primarily because term life insurance provides coverage for a specific period, such as 10, 20, or 30 years, and pays a death benefit only if the insured passes away during that term. Since it does not build cash value and only offers pure life insurance protection, the cost is generally lower than permanent policies like whole life, universal life, or variable life, which provide lifelong coverage and may accumulate cash value over time. Permanent life insurance policies include long-term benefits and features that contribute to higher premiums, such as the savings component found in whole and universal life insurance. Variable life insurance also has investment components, which can lead to additional costs. Thus, term life insurance stands out as the most cost-effective option for those seeking basic coverage without the additional features and benefits that come with permanent policies.