Rhode Island Life Insurance Practice Exam

How can additional coverage be included in a whole life policy?

1. By increasing the mortality charge

2. By adding a decreasing term rider

3. By converting the policy to term insurance

4. By extending the policy's duration

The correct answer is: By adding a decreasing term rider

Adding a decreasing term rider to a whole life policy is a way to provide additional coverage that complements the permanent coverage of the whole life policy. This rider typically allows for a specified amount of term insurance with a death benefit that declines over time, which can be particularly useful for covering temporary financial needs, such as a mortgage or other debts. This added layer of protection works in concert with the whole life component, which provides lifelong coverage and builds cash value. In this context, the decreasing term rider enhances the overall insurance coverage by addressing specific financial obligations that may diminish over time, while the whole life policy continues to cover the policyholder's life with a stable death benefit and cash accumulation. This strategy allows for flexibility in managing insurance needs as circumstances change, especially when there are short-term obligations that need to be insured while still maintaining the lifelong benefits of whole life insurance. The other options suggest modifications that do not effectively add coverage in the same manner. Increasing the mortality charge could raise premiums without providing additional benefits, converting to term insurance changes the nature of the policy rather than adding coverage, and extending the policy's duration does not inherently equate to providing more coverage but rather prolongs the coverage period of the existing policy.