Question

Why are level premiums necessary in life insurance?

a.

Level premiums ensure that older individuals pay lower premiums than younger ones.

b.

Level premiums help insurance companies charge higher rates for younger people.

c.

Level premiums help cover the higher risk of death at older ages without raising premiums as individuals age.

d.

Level premiums reduce the overall cost of life insurance policies.

Posted under IC38 Life Insurance Agent Exam

Answer: (c).Level premiums help cover the higher risk of death at older ages without raising premiums as individuals age. Explanation:Level premiums are necessary in life insurance because they allow the premiums collected in earlier years to compensate for the higher risk of death at older ages. This ensures that premiums do not need to increase as individuals age, making life insurance affordable for policyholders.

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