South Carolina Life Insurance Practice Exam

What must the premium do in a whole life policy over time?

1. Decrease slightly

2. Increase significantly

3. Remain constant

4. Be paid yearly

The correct answer is: Remain constant

In a whole life insurance policy, the premium must remain constant throughout the life of the policyholder. This is a key feature of whole life insurance, which distinguishes it from other types of life insurance policies, such as term life or universal life. With whole life insurance, the premiums are structured to be level and guaranteed, providing predictability for both the policyholder and the insurer. This stability in premium payments allows policyholders to effectively budget for their insurance costs without worrying about fluctuations over time. In addition to having constant premiums, whole life policies also build cash value over time, contributing to the overall benefit for the policyholder. This means that the premiums paid contribute not only to the death benefit but also accumulate savings, which can be accessed during the policyholder's lifetime. This fixed-premium structure is beneficial, especially for individuals looking for long-term insurance coverage without the concern of varying costs throughout the years.