Free Insurance Licensing AZ-Insurance-Producer-Life Practice Exam with Questions & Answers | Set: 4

Adjustable life insurance is designed to permit modification of major policy elements as the policyowner ' s financial circumstances change. Subject to the contract and insurer requirements, adjustable features can include the premium level, premium-payment period, face amount, and sometimes the form or duration of protection.

If the policyholder needs to reduce premium obligations, decreasing the face amount is the most appropriate adjustment among the choices. A lower death benefit reduces the amount of insurance the insurer must support and can therefore permit a corresponding reduction in the required premium structure.

Withdrawing cash value may reduce available policy values but is not the defining adjustable-life mechanism requested in the question and may have adverse effects on policy performance. Cancelling the policy would terminate protection and could require new underwriting if insurance were later sought. Shortening the premium-payment period would ordinarily require premiums to be paid over fewer years and would tend to increase rather than decrease scheduled payment amounts.

The purpose of adjustable life is to accommodate changing protection and funding needs without necessarily requiring the policyowner to replace the entire contract. Therefore, reducing the face amount is the appropriate adjustment.

Study Guide Reference: Types of Life Insurance Policies — adjustable life; flexible policy elements; face amount; premium and protection adjustments.