Life & Health Insurance Exam (National Portion)Ethics and SuitabilityEasy
An insurance producer is helping a young couple, the Millers, who are expecting their first child, purchase life insurance. Their primary concern is to ensure their child's financial well-being if either parent passes away prematurely. They have a limited budget. Which life insurance product would generally be the most suitable recommendation for their immediate needs?
- AWhole Life Insurance
- BTerm Life Insurance
- CVariable Universal Life Insurance
- DEndowment Policy
Show answer & explanationAnswer & explanation
Correct answer: B. Term Life Insurance
Term life insurance provides the highest death benefit for the lowest premium, making it ideal for young families with limited budgets who need substantial coverage for a specific period, such as until children are grown.
Why the other options are wrong
- A. Whole life is more expensive for the same death benefit and includes a cash value component which isn't the primary immediate need for a limited budget.
- C. Variable universal life is complex, has investment risk, and is significantly more expensive, making it unsuitable for a limited budget and immediate death benefit need.
- D. Endowment policies are designed to pay a sum at the end of a period or upon death, often with higher premiums and less focus on pure death benefit protection compared to term life.
Term Life Suitability
Term life insurance is suitable for individuals with temporary protection needs, limited budgets, and a desire for maximum death benefit coverage at the lowest initial cost.
- Affordable premiums.
- High death benefit for specific period.
- No cash value accumulation.
- Ideal for young families or temporary debt coverage.
Memory trick: Match the client's Life stage, Income, Family, and Expense goals.