Oklahoma Life Producer Practice Exam

Which term life policy is cheapest in the first year?

1. Level

2. Annual Renewable Term (ART)

3. Convertible

4. Renewable

The correct answer is: Annual Renewable Term (ART)

The Annual Renewable Term (ART) policy is typically the cheapest option in the first year because it offers coverage for a one-year period with lower initial premiums compared to longer-term policies. With ART, the premium is generally lower during the initial year because it is designed to be renewed annually, allowing for cost efficiency due to its short-term nature. When considering term life insurance, the lower first-year premium of an ART policy attracts many buyers who may need temporary coverage. Although premiums can increase with renewals as the insured ages, the first-year affordability often makes it appealing for individuals seeking immediate coverage without a long-term financial commitment. In contrast, other types of term policies, such as level term or convertible term, may have higher first-year premiums due to their multi-year coverage durations or added flexibility options. This makes ART the most economical choice initially for those looking for cost-effective life insurance in the earliest stages of their policy.