AD Banker Comprehensive Practice Exam

What type of policy ensures that premiums are automatically paid by the company if forgotten?

1. Whole Life

2. Decreasing term

3. Level term

4. Renewable term

The correct answer is: Whole Life

Whole life insurance policies are designed to provide coverage for the insured's entire life, as long as premiums are paid. One important feature of many whole life policies is the built-in automatic premium loan provision. This feature ensures that if the policyholder forgets to pay their premium, the insurance company will automatically use the cash value accumulated in the policy to cover the missed premium payment. This eliminates the risk of the policy lapsing due to non-payment, providing peace of mind to policyholders. In contrast, the other types of policies listed do not typically include this automatic premium payment feature. Decreasing term and level term policies are primarily focused on providing coverage for a specified period, with level term maintaining a consistent death benefit, while decreasing term reduces the benefit over time. Renewable term policies allow the insured to renew the policy at the end of the term without proving insurability but do not address premium payment in the event of a missed payment. Overall, the whole life policy's mechanism of ensuring continued coverage through automatic premium payments is what sets it apart from the other options.