Which statement best describes the 1-Year Term policy?

Which statement best describes the 1-Year Term policy?

• A. It is a single premium policy for one year with premiums based on the insured's attained age
• B. It guarantees level premiums for life
• C. It requires annual premiums for ten years
• D. It automatically converts to permanent coverage after one year

Answer: (C)

A 1-Year Term policy is a short-term life insurance contract that covers only one year. The premium pattern for this type of policy is an annual payment for that policy year, and after the year ends you typically must renew (often with a new premium based on the insured’s age). It does not have cash value, and it does not guarantee level premiums for life. Some term policies can be convertible to permanent coverage, but conversion isn’t automatic after one year. So, the statement that best fits the typical understanding is the one that describes paying premiums on an annual basis for the term. The other descriptions conflict with how a 1-year term usually works: a single premium doesn’t apply to a standard yearly term, term policies don’t guarantee lifetime level premiums, and automatic conversion after one year isn’t a universal feature.

A 1-Year Term policy is a short-term life insurance contract that covers only one year. The premium pattern for this type of policy is an annual payment for that policy year, and after the year ends you typically must renew (often with a new premium based on the insured’s age). It does not have cash value, and it does not guarantee level premiums for life. Some term policies can be convertible to permanent coverage, but conversion isn’t automatic after one year.

So, the statement that best fits the typical understanding is the one that describes paying premiums on an annual basis for the term. The other descriptions conflict with how a 1-year term usually works: a single premium doesn’t apply to a standard yearly term, term policies don’t guarantee lifetime level premiums, and automatic conversion after one year isn’t a universal feature.