PSI Ohio Insurance Practice Exam

Which disadvantage is NOT associated with annually renewable term life policies?

1. The premiums increase each year

2. The coverage amount may decrease

3. The policy can become expensive over time

4. The living benefits decrease over time

The correct answer is: The living benefits decrease over time

The choice indicating that living benefits decrease over time is not a commonly associated disadvantage with annually renewable term life policies. Typically, annually renewable term life insurance provides a death benefit that remains constant throughout the term of the policy, as long as premiums are paid. The living benefits, which refer to options like accelerated death benefits or cash value, are often not a feature of term life policies and instead are more relevant to permanent life insurance policies that accumulate cash value or provide other living benefits. In contrast, the other options highlight real disadvantages of annually renewable term policies. Premiums generally increase each year based on the insured's increasing age, and the overall cost of maintaining the policy can become quite high as the insured ages. Additionally, while the coverage amount does not typically decrease in the same way a permanent policy might, any potential conversion or living benefits available usually do not apply in the same way, making option D a statement that does not reflect a primary concern with this type of insurance.