Tennessee Insurance Practice Exam

Which of the following is a feature of an increasing term life insurance policy?

1. Fixed premiums throughout the policy

2. Decreasing death benefit over time

3. Increasing death benefit over time

4. No cash value accumulation

The correct answer is: Increasing death benefit over time

An increasing term life insurance policy is characterized by a death benefit that rises over the life of the policy. This means that as time goes on, the amount payable to beneficiaries upon the insured's death increases, providing a growing financial benefit that can help to keep pace with inflation or the changing financial needs of the beneficiary. This feature can be especially beneficial for individuals who anticipate greater financial obligations in the future, such as funding a child's education or covering larger debts. As a result, the increasing death benefit aligns with the policyholder's financial planning goals, offering more security as circumstances evolve. While other aspects like fixed premiums throughout the policy, decreasing death benefits, and lack of cash value accumulation are characteristics of different types of policies, they do not apply to increasing term life insurance. In this context, the increasing death benefit stands out as the defining feature that helps the insured adapt to future financial changes.