Illinois Life Producer State-designated Practice Exam

What type of life insurance allows for adjustments in premium payments and death benefits?

1. Term life insurance

2. Whole life insurance

3. Universal life insurance

4. Endowment insurance

The correct answer is: Universal life insurance

Universal life insurance is characterized by its flexibility in both premium payments and death benefits. This type of policy allows policyholders to adjust their premiums within certain limits, as well as the death benefit, which can be increased or decreased based on the policyholder's needs and financial situation. This adaptability makes universal life insurance appealing for those who want the option to manage their insurance as their circumstances change over time. In contrast, term life insurance provides coverage for a specified period with fixed premiums and death benefits, lacking the flexibility found in universal life policies. Whole life insurance offers fixed premiums and guaranteed death benefits, but it doesn’t allow for adjustments in premium payments or benefits as life circumstances change. Endowment insurance typically pays a benefit after a specified period or upon death, but it also does not have the same adjustable features that universal life insurance has. The structured flexibility of universal life insurance is why it is the correct answer, aligning with the question's focus on the ability to adjust both premiums and death benefits.