Pennsylvania Life and Health Insurance Exam Practice Question
Which is an accurate description of the relationship between the premiums of a whole life policy and the premium payment period?
Correct Answer: A
Rationale: In whole life insurance, the premium payment period directly influences the annual premium amount. A shorter payment period means that the insurer must collect the total premium in a limited timeframe, resulting in higher annual premiums to ensure the policy is fully funded before the insured's life expectancy.
Option B is incorrect because a longer payment period allows the insurer to spread the risk and costs over more years, leading to lower annual premiums. Option C misrepresents the relationship, as the payment period is indeed related to the premium amount. Option D contradicts the fundamental principle of insurance financing, as shorter payment periods necessitate higher premiums, not lower.
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