Oklahoma Life Producer Practice Exam

Which policy is most appropriate for Mortgage Protection?

1. Increasing Term Policy

2. Whole Life Policy

3. Decreasing Term Policy

4. Term to 100 Policy

The correct answer is: Decreasing Term Policy

A Decreasing Term Policy is the most appropriate choice for Mortgage Protection because it is specifically designed to decrease in value over time, mirroring the decreasing balance of a mortgage as payments are made. As a homeowner pays off their mortgage, the amount of coverage needed diminishes since the financial obligation to the lender is being reduced. This type of policy ensures that the payout aligns with the outstanding mortgage balance at the time of death, providing protection to the borrower's family without over-insuring the mortgage debt. In the context of mortgage protection, a Decreasing Term Policy offers a cost-effective solution, as the premiums typically decrease along with the coverage amount, making it an economical choice for borrowers looking to safeguard their family's home in the event of their passing. This type of insurance is tailored to address the homeowner's specific needs, ensuring that sufficient funds are available to cover mortgage payments and protect against foreclosure. Other policy types may not fit this scenario as effectively. For example, an Increasing Term Policy provides coverage that grows over time, which does not align with the decreasing need as a mortgage is paid down. A Whole Life Policy offers a permanent death benefit and stable premiums but is generally more expensive and not designed to adjust in value based on a mortgage schedule. Similarly, a