Oklahoma Life Producer Practice Exam

A policy that is described as "expensive" and typically requires higher premiums is likely what type of policy?

1. Term life

2. Whole life

3. Endowment policy

4. Universal life

The correct answer is: Endowment policy

The description of a policy as "expensive" and typically requiring higher premiums aligns with the characteristics of an endowment policy. An endowment policy is designed to pay a lump sum after a specified period or upon the insured's death, whichever comes first. This dual benefit—covering both life insurance and a savings component—often leads to higher premiums compared to other types of life insurance policies such as term life or universal life, which primarily focus on providing death benefits. While whole life insurance also generally requires higher premiums due to its lifelong coverage and cash value accumulation, endowment policies are particularly notable for their higher cost because they are structured to provide a guaranteed payout at a certain age or time, adding an investment aspect to traditional life coverage. In summary, the structure of an endowment policy, which combines a savings element with life insurance guarantees within a specific time frame, makes it the most expensive option among the types listed, thereby justifying its description as "expensive."