Massachusetts State Life Insurance Practice Exam

What is a characteristic of renewable term insurance?

1. It provides a cash value benefit

2. Coverage cannot be renewed once it expires

3. Allows continuation of coverage without proof of insurability

4. Premiums decrease each year following renewal

The correct answer is: Allows continuation of coverage without proof of insurability

Renewable term insurance is designed to offer a key benefit: the ability to continue coverage without having to provide evidence of insurability when the policy is renewed. This characteristic is crucial because it means that the insured does not need to undergo any medical underwriting or reassessment, which can be advantageous for individuals whose health may have declined since the original policy was issued. This provision makes renewable term insurance particularly appealing for those who value stability and long-term coverage without the hassle of potential health evaluations at each renewal period. Other aspects of renewable term insurance help illustrate why the correct answer is clear. For instance, renewable term policies do not accumulate cash value, which distinguishes them from permanent life insurance policies that offer such benefits. Additionally, while coverage can be renewed, the statement that it cannot be renewed once it expires does not apply, as renewable term insurance specifically allows for renewal as long as the terms of the policy are followed. Lastly, premium structures vary with term policies, but typically they may increase upon renewal due to age and other factors rather than decrease, contrary to the notion that premiums decrease each year.