New Jersey Life Producer Practice Exam

What can an insured do to protect against an unintentional lapse of a life insurance policy?

1. Request a grace period

2. Change to a whole life policy

3. Request a buy and sell agreement

4. Set up automatic payments

The correct answer is: Request a buy and sell agreement

To protect against an unintentional lapse of a life insurance policy, setting up automatic payments is an effective strategy. This method ensures that premiums are paid on time by automatically deducting the required amount from the insured's bank account or credit card, minimizing the risk of missing a payment due to oversight or forgetfulness. A grace period is typically already built into life insurance policies, allowing policyholders a specified time frame to make premium payments without coverage lapsing, but it doesn’t prevent lapses from occurring in the first place. Changing to a whole life policy might offer more stability and potential cash value accumulation, but it doesn't directly prevent lapses. A buy and sell agreement relates to business partnerships and is not pertinent in the context of preventing policy lapses for individual life insurance. By implementing automatic payments, the insured can maintain continuous coverage and ensure that their policy remains active, thus safeguarding against the risk of an unintentional lapse.