Which statement best describes fixed versus flexible premium?

Which statement best describes fixed versus flexible premium?

• A. Flexible premium allows varying payments, typical in universal life.
• B. Fixed premium remains constant; flexible premium allows varying payments, typical in universal life.
• C. Fixed premium changes with inflation; flexible premium remains constant.
• D. Flexible premium cannot be used in universal life.

Answer: (B)

In life insurance, premium payment patterns distinguish how funds are provided to keep a policy in force. A fixed premium stays the same over time, while a flexible premium lets the policy owner vary the amount and timing of payments. This flexibility is a hallmark of universal life, where the policy’s cash value and the cost of insurance help determine funding needs from year to year. The best description combines both ideas: fixed premium remains constant, and flexible premium allows varying payments, with this flexibility being typical in universal life. This captures how universal life policies let you adjust contributions while traditional fixed-premium designs keep payments level. Why the other ideas don’t fit: saying flexible premium is the only characteristic and is typical for universal life omits the constant component of fixed-premium contracts. Claims that fixed premiums change with inflation or that flexible premiums can’t be used in universal life are incorrect.

In life insurance, premium payment patterns distinguish how funds are provided to keep a policy in force. A fixed premium stays the same over time, while a flexible premium lets the policy owner vary the amount and timing of payments. This flexibility is a hallmark of universal life, where the policy’s cash value and the cost of insurance help determine funding needs from year to year.

The best description combines both ideas: fixed premium remains constant, and flexible premium allows varying payments, with this flexibility being typical in universal life. This captures how universal life policies let you adjust contributions while traditional fixed-premium designs keep payments level.

Why the other ideas don’t fit: saying flexible premium is the only characteristic and is typical for universal life omits the constant component of fixed-premium contracts. Claims that fixed premiums change with inflation or that flexible premiums can’t be used in universal life are incorrect.