Rhode Island Life Insurance Practice Exam

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Prepare for the Rhode Island Life Insurance Exam with comprehensive quizzes. Utilize flashcards and multiple choice questions, each equipped with hints and detailed explanations to ensure you're well-prepared for your certification!

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Under a Graded Premium Whole Life policy, what happens to the premium?

The premium decreases each year
The premium increases each year during early years and remains the same after
The premium remains constant for the life of the policy
The premium is paid in a lump sum only

The correct answer is: The premium increases each year during early years and remains the same after

In a Graded Premium Whole Life policy, the premium is structured to increase during the early years of the policy before leveling off at a certain point for the remainder of the policy’s life. This approach allows policyholders to initially pay a lower premium, which gradually rises over time, making it more affordable at the outset. The premium typically increases annually until it reaches a predetermined level, which then remains constant for the life of the policy. This design is particularly beneficial for individuals who anticipate that their financial situation will improve in the future, enabling them to afford higher premiums over time, while initially easing the burden of higher costs. After the graded period concludes, the policyholder can benefit from a consistent premium that offers lifelong coverage.