Tennessee Insurance Practice Exam

A Return of Premium life insurance policy is categorized as?

1. Term life insurance

2. Whole life and decreasing term

3. Whole life and increasing term

4. Universal life insurance

The correct answer is: Whole life and increasing term

A Return of Premium (ROP) life insurance policy is categorized as a type of term life insurance that provides a unique benefit at the end of the policy term. Specifically, if the insured outlives the duration of the policy, a portion of the premiums paid is returned to them. This structure aligns closely with term life policies, as they primarily provide coverage for a specified period and do not accumulate cash value like whole life or universal life policies. Return of Premium policies are designed to appeal to consumers who may be hesitant to invest in term life insurance if they perceive they will receive no benefit should they outlive the term. By offering a return of premiums, these policies blend the elements of term insurance with an incentive that mimics some financial benefits found in whole life products, though the core structure remains rooted in term insurance. The other categories mentioned do not accurately describe ROP insurance. Whole life insurance provides permanent coverage with a cash value component, while decreasing or increasing term insurance refers to the changing face amount of the policy over time without the return of premiums aspect. Each of these terms highlights different mechanisms and benefits, but none captures the specific feature of the ROP policy that distinguishes it from standard term insurance. Therefore, it accurately fits into the term life