Oklahoma Life Producer Practice Exam

What type of insurance policy combines Convertible Term and Whole Life insurance, resulting in a future increase in premium upon conversion?

1. Universal Life

2. Modified Life

3. Graded Premium Life

4. Variable Universal Life

The correct answer is: Modified Life

The combination of Convertible Term and Whole Life insurance, which leads to a future increase in premium upon conversion, is best characterized by Modified Life insurance. This type of policy allows the insured to start with lower premiums during the initial years, typical of a term policy, and then transition into a more permanent whole life policy, which includes higher premiums later in the policy's life. In Modified Life insurance, the initial lower premiums are intended to make it more affordable for the policyholder when they first enter the market. As the insured ages or upon the conversion to a whole life policy, premiums increase to reflect the lifelong coverage that is now being provided. This structure allows for flexibility and the potential for the policyholder to adjust their coverage as their needs change over time while also anticipating an increment in the cost of insurance as they age. In contrast, the other options handle insurance structures or benefits differently and do not specifically reflect the combination of features described in the question. For instance, Universal Life offers flexible premiums and death benefits but does not entail a preset premium increase upon conversion like Modified Life. Graded Premium Life involves a gradual increase in premiums but typically doesn't have the same characteristics of combining term and whole life features. Variable Universal Life, on the other hand, integrates