Oklahoma Life Producer Practice Exam

Which policy type would likely cost more in premiums over time compared to traditional whole life?

1. Graded life

2. Term life

3. Endowment

4. Modified life

The correct answer is: Endowment

The endowment policy typically costs more in premiums over time compared to traditional whole life insurance because it is designed to provide benefits both upon the policyholder's death and if they reach a certain age while still alive. Endowment policies combine a life insurance component with a savings component, as they guarantee a payout after a specific period or upon the policyholder's death before that period ends. This combination of benefits leads to higher premiums since the insurer assumes a greater risk by ensuring that the policyholder receives a payout at a predefined point in time, regardless of their status. Traditional whole life insurance, while also providing a death benefit and a cash value accumulation, is structured differently and typically has lower initial premiums compared to endowment policies. Thus, when considering the long-term financial implications, the endowment policy represents a more expensive commitment due to its dual focus on both life coverage and savings accumulation.