Primerica Life Producer Practice Test

Which statement best describes annually renewable insurance?

1. It is whole life insurance

2. It is level term insurance

3. It has fixed premiums for life

4. It is a non-renewable policy

The correct answer is: It is level term insurance

Annually renewable insurance is a type of term insurance that provides coverage for one year at a time, with the option to renew the policy each year. It is characterized by premiums that may increase or change upon renewal based on the insured's age and the risk associated with the insured's health at the time of renewal. Unlike whole life insurance, which provides lifelong coverage with fixed premiums and a cash value component, annually renewable insurance does not build cash value. The renewal aspect allows the policyholder to maintain coverage without undergoing a new medical examination, making it a convenient option for those seeking temporary insurance. In contrast to level term insurance, which offers fixed premiums and a defined term such as 10 or 20 years, annually renewable insurance involves premiums that can change each year. The concept of fixed premiums for life pertains to whole life insurance, which is not a feature of annually renewable insurance as premiums can fluctuate annually based on various factors. Non-renewable policies do not allow for coverage beyond a specified term, which contradicts the nature of annually renewable insurance that explicitly permits renewal each year.