Advanced Diploma of Financial Planning (ADFP) Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Advanced Diploma of Financial Planning Test. Study with interactive quizzes and comprehensive questions, each offering detailed explanations and insights. Gear up for success!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which of the following statements about life insurance protection is incorrect?

Term insurance provides temporary protection only
Cash value insurance has a savings component
Net premiums for term insurance are constant over time
Death rates increase as individuals age

The correct answer is: Net premiums for term insurance are constant over time

The statement about net premiums for term insurance being constant over time is indeed incorrect. In term insurance, while the premiums may appear to be level for a specific period, such as the initial term of coverage, they can actually increase when the term expires or when the policyholder renews the coverage for a new term. This is due to the natural increase in mortality risk as individuals age, which affects the pricing of term life insurance. Thus, while initial premiums may seem constant, they are not effectively constant if you consider the long-term perspective of renewing or purchasing additional coverage later in life. Understanding the nuances of term insurance is critical as it plays a vital role in financial planning, allowing individuals to assess their needs for temporary versus lifelong coverage and what the associated costs may be over time.