What does a Modified Premium Life insurance policy imply about premium payments?

What does a Modified Premium Life insurance policy imply about premium payments?

• A. They are level throughout the policy term
• B. They will decrease after a specified period
• C. They will increase after a few years
• D. They are always higher than term premiums

Answer: (C)

A Modified Premium Life insurance policy is characterized by a premium structure that begins at a lower amount for a set initial period, typically a few years, and then increases after that period expires. This means that initially, the policyholder pays lower premiums before transitioning to higher, level premiums for the remainder of the policy's term. The defining feature of a modified premium policy is this increase in premiums after the initial period, which is why option C is the correct choice. It reflects the expectation that the premium payments will rise after the introductory phase. Understanding this structure is important for clients considering such policies, as they must budget for future increases in premium costs.

A Modified Premium Life insurance policy is characterized by a premium structure that begins at a lower amount for a set initial period, typically a few years, and then increases after that period expires. This means that initially, the policyholder pays lower premiums before transitioning to higher, level premiums for the remainder of the policy's term.

The defining feature of a modified premium policy is this increase in premiums after the initial period, which is why option C is the correct choice. It reflects the expectation that the premium payments will rise after the introductory phase. Understanding this structure is important for clients considering such policies, as they must budget for future increases in premium costs.