Question

Why do insurance companies use level premiums for life insurance policies?

a.

Level premiums allow insurance companies to charge higher rates to younger individuals.

b.

Level premiums ensure that the premiums collected in earlier years cover the deficits in later years.

c.

Level premiums are required for short-term life insurance contracts.

d.

Level premiums allow for more flexibility in adjusting premium rates as individuals age.

Posted under L01 What Life Insurance Involves IC38 Life Insurance Agent Exam

Answer: (b).Level premiums ensure that the premiums collected in earlier years cover the deficits in later years. Explanation:Insurance companies use level premiums for life insurance policies because they ensure that the excess premiums collected in earlier years cover the deficits in later years. This makes it possible to keep premiums constant over the life of the policy.

Interact with the Community - Share Your Thoughts

Uncertain About the Answer? Seek Clarification Here.

Understand the Explanation? Include it Here.

Q. Why do insurance companies use level premiums for life insurance policies?
Add Comment

Similar Questions

Explore Relevant Multiple Choice Questions (MCQs)

Q. How does the concept of level premiums apply to general insurance policies?

View solution

Q. What role does the Principle of Pooling play in life insurance?

View solution

Q. What is the purpose of the life insurance policy document?

View solution

Q. Why is life insurance often compared to financial products?

View solution

Q. What is one of the advantages of cash value life insurance contracts?

View solution

Q. What is one of the disadvantages of cash value life insurance contracts?

View solution

Q. The principle of risk pooling in life insurance primarily serves to:Which document serves as evidence of the life insurance contract and contains all the terms and conditions of the insurance?

View solution

Q. The principle of risk pooling in life insurance primarily serves to:

View solution

Q. What does the sum assured in a life insurance policy imply?

View solution

Q. What is one of the advantages of life insurance as a financial product?

View solution

Q. What is one of the disadvantages of life insurance as a financial product?

View solution

Q. In financial terms, what is an asset?

View solution

Q. What does the Human Life Value (HLV) concept measure?

View solution

Q. What is a characteristic of a level premium in a life insurance policy?

View solution

Q. How can mutuality help reduce risk in financial markets?

View solution

Q. What does the element of guarantee in a life insurance contract imply?

View solution

Q. How does diversification reduce risks in financial markets?

View solution
View All MCQs on L01 What Life Insurance Involves

Recommended Subjects

Are you eager to expand your knowledge beyond IC38 Life Insurance Agent Exam? We've handpicked a range of related categories that you might find intriguing.

Click on the categories below to discover a wealth of MCQs and enrich your understanding of various subjects. Happy exploring!

Cytogenetics

Delve into the genetic mysteries of chromosomes with our Cytogenetics category....

Waste Water Engineering

Navigate the challenges of wastewater treatment and management with our Waste Water...

Professional Communication

Hone your communication skills with our Professional Communication category. Enhance...

Heat Transfer

Explore the fascinating world of heat transfer with our Heat Transfer category....

Environmental Biotechnology

Discover the intersection of biology and environmental science with our Environmental...

General Knowledge

Expand your horizons and stay informed about the world with our General Knowledge...

Civil Engineering

Dive into the world of Civil Engineering with our specialized category. Explore the...

Human Resource Management

Explore the dynamic field of Human Resource Management (HRM) with our dedicated...

Surveying

Master the art of land surveying and geomatics with our Surveying category. Explore...