Primerica Life Producer Practice Test

All other factors being equal, the least expensive first-year premium payment is found in?

1. Whole Life Insurance

2. Universal Life Insurance

3. Annually Renewable Term

4. Variable Life Insurance

The correct answer is: Annually Renewable Term

The least expensive first-year premium payment is associated with Annually Renewable Term insurance. This type of policy is designed to provide pure, temporary coverage for a single year at a time. The premiums for term insurance, especially when they are annually renewable, are generally lower than those for permanent policies like Whole Life Insurance, Universal Life Insurance, or Variable Life Insurance, which include elements such as cash value accumulation and lifelong coverage. Term insurance focuses solely on providing a death benefit, making it less expensive as it does not involve investment components or long-term guarantees that drive up costs. As the insured ages, premiums for term insurance will usually increase at renewal, but in the first year, these costs remain lower compared to the investment-heavy nature of permanent policies. Therefore, for someone looking for the least expensive initial premium, Annually Renewable Term insurance is the most cost-effective option.