Rhode Island Life Insurance Practice Exam

T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

1. Convertible term

2. Level term

3. Renewable

4. Decreasing term

The correct answer is: Renewable

The term policy that allows T to continue coverage after the initial policy period is known as renewable term insurance. This type of coverage provides the policyholder with the option to renew their policy for an additional term, typically without the need for a medical examination or to provide evidence of insurability. This feature is significant because it ensures that the policyholder can maintain their coverage even if their health status has changed since the original issuance of the policy. In contrast, convertible term insurance allows a policyholder to change their term policy into a permanent policy during a specified time frame, not simply to renew it. Level term insurance maintains the same death benefit throughout the term but does not inherently offer renewal provisions without being specifically labeled as renewable. Decreasing term insurance features a death benefit that decreases over the policy period, generally used for covering debts that diminish over time, which is distinctly different from the renewal aspect. Therefore, the focus on the ability to continue coverage after the initial period aligns with the characteristics of renewable term insurance.