South Carolina Life and Health Practice Exam

What type of policy typically allows for adjustments to be made based on an insurer's claim review?

1. Term life insurance

2. Whole life insurance

3. Universal life insurance

4. Modified life insurance

The correct answer is: Universal life insurance

Universal life insurance is designed to be flexible, allowing policyholders to adjust their premiums and death benefit amounts over time. This flexibility is a key feature that distinguishes universal life from other types of life insurance. When an insurer conducts a claim review, they may assess various factors such as the policy's cash value, premium payments, and the insured's health status. Since universal life policies have an investment component and allow for ongoing adjustments, the insurer can modify the policy parameters based on the outcomes of the review. This adaptability helps ensure that the policy remains aligned with the policyholder's financial needs and goals. Term life insurance provides a fixed death benefit for a specific period and does not allow for adjustments based on claim reviews. Whole life insurance offers guaranteed benefits and fixed premiums, which means no adjustments can be made. Modified life insurance typically offers lower premiums at the beginning that increase over time but lacks the extensive adjustment capabilities seen in universal life policies.