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Term Life Practice Questions: Types and Features

Updated 11 min read
Key takeaway

This practice set tests how term policies differ by benefit pattern, premium period, return-of-premium feature, renewal right, and conversion right.

  • Read each scenario for the specific contractual feature described.
  • These are original study questions based on the Texas Life Agent outline, not recalled Pearson VUE items or a prediction of your score.
On this page10 sections
  1. How to work through the set
  2. Question 1: level term benefit
  3. Question 2: decreasing term
  4. Question 3: return-of-premium term
  5. Question 4: annually renewable term
  6. Question 5: renewable versus convertible
  7. Question 6: conversion right and evidence of insurability
  8. Question 7: premium pattern versus benefit pattern
  9. Question 8: policy ends versus conversion option
  10. Review: name the feature before choosing an answer

Term insurance is easiest to classify by asking two separate questions: how does the death benefit behave during the term, and what options does the contract provide at the end of a period? Those questions prevent common mix-ups. Level, decreasing, return-of-premium, and annually renewable term describe product structures. Renewable and convertible describe rights that may be attached to a term policy. A policy can have more than one feature, so do not assume those labels are mutually exclusive.

The current Pearson VUE Texas outline places term life under Life-General Knowledge, Types of Policies, and specifically calls out level, decreasing, return-of-premium, annually renewable, renewable, and convertible features. The exam may describe a situation instead of naming the policy. For each item below, identify the clue in the facts, eliminate answers that describe a different feature, and then read the explanation even when you chose correctly. All scenarios are newly written practice examples, not copied or recalled exam questions.

How to work through the set

  • Mark the time period: one year, a fixed number of years, or a longer level-premium period.
  • Track the death benefit separately from the premium. A level benefit does not mean the premium must remain level forever.
  • Treat renewal and conversion as different rights: renewal continues term protection; conversion changes the policy form under contract rules.
  • Use only facts in the stem. Actual rates, conversion windows, renewal ages, exclusions, and premiums depend on the contract and insurer.

Question 1: level term benefit

Benefit amount stays level during the stated period

A parent buys a 20-year policy to protect a family during the years a mortgage and childcare costs are highest. The contract states a $400,000 death benefit throughout the 20-year period. Which term design best matches the stated benefit pattern?

  1. Level term
  2. Decreasing term
  3. Annually renewable term with a benefit that falls each year
  4. Return-of-premium term, because the benefit must decline
Answer: A. Level term describes a death benefit that remains at the stated amount during the specified level term, subject to the contract staying in force and its terms being met. The stem gives the same $400,000 amount throughout 20 years, so A is the direct match. Decreasing term would reduce the benefit over time. Annually renewable term generally renews in successive short periods and may have rising renewal premiums; it does not inherently mean the benefit falls. Return-of-premium is a premium-return feature, not a label for a declining death benefit. Notice that the question gives a purpose and a duration, but the decisive clue is the fixed benefit amount. Do not infer that a level benefit also guarantees a level premium for every possible policy design; read each feature separately.

Question 2: decreasing term

Match a declining benefit to a declining obligation

A borrower wants coverage that broadly tracks a loan balance expected to fall over time. The proposed policy has a death benefit that steps down according to its schedule while the covered term continues. Which design is described?

  1. Level term
  2. Decreasing term
  3. Single-premium whole life
  4. A convertible feature
Answer: B. A decreasing-term policy has a death benefit that declines according to the policy schedule during the term. It may be selected when the financial obligation being protected is also expected to decline, although the exact policy schedule does not necessarily equal a loan amortization schedule. Level term keeps the benefit level, so A contradicts the central fact. Single-premium whole life is permanent coverage funded with one premium, not a declining temporary benefit. Conversion is an option to exchange eligible term coverage for a permanent policy under stated conditions; it does not itself describe a declining benefit. On an exam, the phrase “steps down” or “decreases over time” is a strong clue, but avoid adding a guarantee that the insurance benefit will match the exact debt balance unless the contract expressly says so.

Question 3: return-of-premium term

A return feature is governed by policy conditions

An applicant compares two term policies. One policy advertises that, if the insured survives the specified term and the contract’s conditions are met, it will return eligible premiums. Which statement identifies the feature without overstating it?

  1. It is return-of-premium term; the insured receives a death benefit at maturity even if alive.
  2. It is return-of-premium term; the return is subject to the contract’s terms and does not turn term insurance into ordinary whole life.
  3. It is decreasing term because premiums are returned when the benefit falls.
  4. It is an automatic policy loan against cash value.
Answer: B. Return-of-premium term adds a contractual premium-return feature under specified conditions, often tied to surviving the term and maintaining the policy as required. The exact premiums eligible for return, timing, treatment of riders, and consequences of cancellation must be read in the policy. It does not mean the insured receives a death benefit while alive, so A confuses maturity value with a death claim. It is not defined by a declining benefit and does not create ordinary whole-life cash value or an automatic loan. The exam distinction is the feature’s name and its condition, not whether the product is economically preferable. A useful check is to ask what triggers payment: death during the term, survival to the defined endpoint, or a policy loan request.

Question 4: annually renewable term

Renewed in short periods, with premium changes possible

A policy provides one-year term protection and gives the owner a contractual right to renew for additional one-year periods without new evidence of insurability, subject to the policy’s stated renewal limits. What is the best classification?

  1. Annually renewable term
  2. Single-premium term
  3. Decreasing term
  4. A nonforfeiture option
Answer: A. Annually renewable term is issued for short, commonly annual periods and may allow the policyowner to renew for another period under the contract without proving insurability again. The premium may rise as the insured ages, and renewability usually has an age or other contractual limit. The scenario specifically identifies one-year periods and a renewal right, making A the best answer. A single-premium policy describes funding, not annual term renewal. Decreasing term describes a declining death benefit. Nonforfeiture options generally concern values or continuation choices associated with permanent policies after premiums stop, rather than a one-year term renewal. Do not interpret “renewable” as a promise that the premium never changes or that the coverage can continue forever; the policy language defines the available periods and limits.

Question 5: renewable versus convertible

Continue term versus change policy type

Two policyowners reach the end of an initial term. One wants to keep temporary protection for another eligible period without new medical evidence. The other wants to exchange eligible term coverage for a permanent policy under the contract’s conversion provisions. Which pairing is correct?

  1. First: renewable; second: convertible
  2. First: convertible; second: renewable
  3. Both are nonforfeiture options
  4. Both require the owner to surrender the term policy for its cash value
Answer: A. Renewability concerns continuing term insurance for another period under contract conditions, usually without new evidence of insurability, though premiums and age limits may apply. Convertibility concerns changing eligible term coverage to a permanent form allowed by the contract, typically within a specified time and subject to the conversion rules. Thus A matches each owner’s objective. B reverses the two rights. Nonforfeiture options are not the same as term renewability or conversion. Term insurance generally does not build the cash value that would make a surrender-for-cash-value answer fit. In real policy review, conversion deadlines, eligible permanent products, benefit limits, and premium calculations matter; on the exam, focus first on whether the person wants to continue temporary coverage or change the coverage type.

Question 6: conversion right and evidence of insurability

Do not confuse a contractual option with automatic approval for any policy

An insured discovers a serious medical condition but still has a term policy with an unexpired conversion window. The owner asks whether this automatically permits conversion to any permanent policy the insurer sells, at any amount and at any time. Which response is most accurate?

  1. Yes; conversion rights have no deadlines, product limits, or contract conditions.
  2. No; the contract controls the eligible conversion period, product, amount, and other terms, even when new evidence is not required for an available conversion.
  3. No; conversion always requires fresh evidence and is therefore unavailable after a diagnosis.
  4. Yes; the owner may choose any face amount and premium after the window closes.
Answer: B. A conversion privilege can let an insured move eligible term coverage to an allowed permanent policy without new evidence of insurability, but the policy defines the window, eligible policy forms, limits, and required process. It is not unlimited or perpetual. Therefore B preserves the helpful function of the right while recognizing contractual boundaries. A and D invent open-ended rights. C incorrectly assumes that every conversion requires new underwriting, defeating the point of the option. The exam often tests whether the candidate can distinguish the existence of a right from the exact conditions for exercising it. In practice, the owner should review the policy and contact the insurer before the deadline rather than assume a diagnosis either erases or expands the conversion privilege.

Question 7: premium pattern versus benefit pattern

Treat premium and benefit as separate dimensions

A question states that a 10-year term policy has a level death benefit for the entire term. It says nothing about the premium schedule. Which conclusion is justified from those facts alone?

  1. The death benefit is level; the premium schedule cannot be determined from the stated fact alone.
  2. The premium must be level for the insured’s entire life.
  3. The policy must be annually renewable and the death benefit must decline.
  4. The policy has a cash value because the benefit is level.
Answer: A. A level death benefit tells you the amount payable under the contract during the stated period; it does not, by itself, answer every question about how premiums are structured. Many level-term designs have level premiums over the selected period, but a test item that gives only the benefit pattern does not authorize every broader conclusion. B changes a 10-year term into lifetime premium certainty, which is not stated. C combines unrelated features and contradicts the described level benefit. D confuses a level death benefit with permanent-policy cash value. A disciplined exam taker keeps each variable separate: coverage duration, death-benefit pattern, premium pattern, renewal rights, conversion rights, and cash-value treatment.

Question 8: policy ends versus conversion option

Review: name the feature before choosing an answer

If you missed any item, write the clue beside the feature: level benefit, declining benefit, premium-return condition, one-year renewal, continuation without new evidence, or conversion to permanent coverage. Then write the limit that prevents overstatement: policy schedule, renewal age, conversion window, eligible product, or survival condition. This two-part review helps you avoid answers that turn a limited contractual option into a blanket promise.

A second useful review is to draw two columns: product type and policy right. Put level, decreasing, return-of-premium, and annually renewable in the first column. Put renewable and convertible in the second. Annually renewable describes a product pattern; renewable can also describe a continuation right. Context decides what the question is asking. If two answers seem plausible, return to the exact fact pattern and ask whether it describes the design of the coverage or an option available to the owner.

For a broader review, see the Texas Life Agent exam outline, term and permanent policy comparison, and practice strategy. Then try a mixed set so you practice identifying term features when they appear beside unrelated policy provisions.

Common questions

What is the difference between renewable and convertible term life?

Renewable term lets the owner continue temporary coverage for another eligible period under the contract. Convertible term lets the owner exchange eligible term coverage for an allowed permanent policy under conversion rules. Deadlines, ages, products, and amounts are controlled by the policy.

Does level term mean the premium is level forever?

No. Level term describes a benefit pattern over a specified period. Premium structure is a separate policy feature, and term coverage itself is temporary. Read the stated period and premium terms rather than inferring lifetime guarantees from the word level.

Does return-of-premium term build cash value?

A return-of-premium feature is not the same as ordinary permanent-policy cash value. The policy may return eligible premiums if stated conditions are met, but the contract determines what qualifies and when payment occurs.

Are these recalled Texas Life Agent exam questions?

No. They are original practice scenarios written from topics in the published Pearson VUE outline. They are intended to teach distinctions and do not reproduce secure exam items or predict an official scaled score.

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