What describes a 1-Year Term policy?

What describes a 1-Year Term policy?

• A. It provides coverage for one year with a level premium payable over the period
• B. It is a single premium, 1-year term policy where premiums are based on the insured's attained age
• C. It guarantees lifetime coverage with a fixed premium
• D. It automatically converts to permanent coverage at the end of the year

Answer: (B)

A 1-year term policy is designed to provide coverage for exactly one year, and its cost is typically paid as a single lump-sum premium at issue. That premium is determined by the insured’s attained age at the time the policy is issued, reflecting the mortality risk for that one-year term. Because the coverage ends after one year, the idea of paying a level premium over the period isn’t how this specific term is usually structured. A permanent, lifetime coverage with a fixed premium describes a different product, not a short-term term policy. And while some term policies offer a conversion option, automatic conversion at the end of the year isn’t the defining feature of a 1-year term.

A 1-year term policy is designed to provide coverage for exactly one year, and its cost is typically paid as a single lump-sum premium at issue. That premium is determined by the insured’s attained age at the time the policy is issued, reflecting the mortality risk for that one-year term. Because the coverage ends after one year, the idea of paying a level premium over the period isn’t how this specific term is usually structured. A permanent, lifetime coverage with a fixed premium describes a different product, not a short-term term policy. And while some term policies offer a conversion option, automatic conversion at the end of the year isn’t the defining feature of a 1-year term.