South Carolina Life Insurance Practice Exam

What happens to the premium throughout the term of a standard whole life insurance policy?

1. The premium increases with age

2. The premium decreases over time

3. The premium remains level

4. The premium becomes variable

The correct answer is: The premium remains level

In a standard whole life insurance policy, the premium remains level throughout the term of the policy. This means that the policyholder pays the same premium amount each year, regardless of changes in age or health status. The consistency in premium payments is one of the key features of whole life insurance, as it provides financial predictability and stability for the policyholder. The level premium is calculated based on the insured's age at the time of buying the policy and is designed to cover both the cost of insurance and contribute to the cash value accumulation over time. Unlike term insurance, where premiums may change based on age or renewal factors, whole life insurance maintains this level premium throughout the life of the policy. This characteristic is beneficial for budgeting and managing long-term financial planning. In summary, the correct answer highlights the stability and predictability of premiums associated with standard whole life insurance policies.