Life License Qualification Program (LLQP) Practice Exam

What is the best type of life insurance policy to protect a 15-year mortgage?

1. Modified Whole Life

2. 15-Year Level Term

3. 15-Year Decreasing Term

4. Adjustable Life

The correct answer is: 15-Year Decreasing Term

The 15-Year Decreasing Term policy is the most suitable choice for protecting a 15-year mortgage because it is specifically designed to align with the decreasing balance of a mortgage over time. As mortgage payments are made, the outstanding balance of the loan decreases, and corresponding coverage through a decreasing term life insurance policy also reduces. This means that the death benefit is structured to match the amount needed to cover the mortgage, ensuring that if the policyholder passes away, the benefit can fully cover the remaining mortgage balance, providing peace of mind to both the borrower and their beneficiaries. Moreover, the term length and coverage reduction closely match the period and the nature of the debt, offering a cost-effective solution since decreasing term insurance typically has lower premiums than level term insurance for the same coverage amount. This alignment of coverage needs and insurance product design makes it the ideal option for this situation. In contrast, other types of policies, such as modified whole life, 15-year level term, and adjustable life, do not provide as direct a match for the requirements of mortgage protection. Modified whole life involves a cash value component, which may not be necessary for mortgage protection. A 15-year level term policy provides a fixed benefit amount throughout the term, which does not decrease