PSI Life Exam Practice Test

What best describes a single premium cash value policy?

1. Flexible premium with evidence of insurability

2. It provides for only one premium to be paid without evidence of insurability

3. Annual premiums adjusted for age

4. Monthly premiums with flexible coverage

The correct answer is: It provides for only one premium to be paid without evidence of insurability

A single premium cash value policy is characterized by the requirement to pay only one premium upfront, which distinguishes it from other types of life insurance policies that may involve multiple payments or ongoing premiums. This type of policy typically accumulates cash value over time, creating an investment component in addition to providing life insurance coverage. The absence of evidence of insurability means that the policy can be issued without requiring the applicant to undergo medical underwriting or provide medical information. This can be appealing for individuals seeking immediate coverage and wishing to avoid the complexities related to health assessments. In contrast, policies requiring flexible premiums may involve the need for evidence of insurability, often necessitating ongoing assessments related to the insured's health. Additionally, annual premiums adjusted for age would apply to whole life or term policies where premiums increase as the insured ages. Finally, policies that feature monthly premiums with flexible coverage options do not align with the single premium nature, as they imply ongoing payment obligations and adjustable terms. Hence, the defining feature of single premium cash value policies is the singular premium payment without necessitating further health disclosures.