Certified Financial Consultant (CFC) Practice Exam

In level term insurance, what does the term "level" specifically refer to?

1. The duration of the policy

2. The premium amount

3. The face amount

4. The benefits provided

The correct answer is: The face amount

In level term insurance, the term "level" specifically refers to the face amount of the policy, which remains constant throughout the duration of the term. This means that the death benefit provided to beneficiaries does not change, regardless of when the insured person passes away, as long as it occurs within the policy term. This characteristic ensures that the insurance coverage remains predictable and stable, which is essential for financial planning. Policyholders can have confidence that their beneficiaries will receive a predetermined sum, making it easier to plan for future financial needs, such as covering debts or providing for dependents. While the premium amount could be level (remaining the same over the life of the policy) in certain types of level term insurance, the primary focus of the term "level" is on the face amount, thus making it a critical aspect of understanding the policy's structure and benefits.