Oklahoma Life Producer Practice Exam

What type of policy goes from one that doesn't build cash value to one that does build cash value?

1. renewable

2. level

3. convertible

4. term

The correct answer is: convertible

The correct answer is convertible. A convertible policy is a type of life insurance policy that allows the policyholder to convert a term life insurance policy, which does not build cash value, into a whole life or universal life insurance policy that does accumulate cash value over time. This feature provides flexibility for the policyholder, allowing them to maintain coverage and transition into a policy that has potential savings or investment components. Understanding the nature of convertible policies is crucial for clients who want the initial low premiums often associated with term insurance but later wish to transition to a policy that offers savings potential. This can be particularly valuable if the policyholder's needs change over time or if they want to ensure a lifelong commitment to insurance coverage while also building equity.