Maryland Life and Health Insurance License Practice Exam

What describes the premium structure of a Modified Whole Life policy?

1. Uniform premium throughout the policy life

2. Higher premiums in the initial years

3. Lower than typical whole life premiums initially, then higher later

4. Only one premium payment required

The correct answer is: Lower than typical whole life premiums initially, then higher later

The premium structure of a Modified Whole Life policy is characterized by lower initial premiums that gradually increase after a specified period. Initially, the policyholder pays a premium that is lower than that of a traditional whole life policy, making it more affordable at the outset. After a certain number of years, the premiums rise to a level that is more consistent with those of standard whole life insurance policies, and they remain uniform thereafter. This structure is attractive to many insured individuals because it allows them to ease into the financial commitment, making it easier to manage cash flow in the early years while still providing the long-term benefits associated with whole life coverage, such as cash value accumulation and lifelong protection.