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!

Practice this question and more.


What type of life insurance policy features a lower premium for an initial period which then increases to a higher fixed amount?

  1. Universal Life

  2. Modified Premium Life

  3. Whole Life

  4. Term Life

The correct answer is: Modified Premium Life

The type of life insurance policy that features a lower premium for an initial period which then increases to a higher fixed amount is known as Modified Premium Life. This approach allows policyholders to pay reduced premiums for the first few years of the policy, making it more affordable during that period. After the initial phase, the premiums then rise to a higher level, which remains fixed for the duration of the policy. This structure can be particularly appealing to individuals who anticipate a rise in their income or financial situation in the future, as it enables them to manage cash flow effectively in the early years. Additionally, this type of policy combines elements of both term insurance and permanent insurance, as it provides a set period of lower premiums before stabilizing at a higher cost. In contrast, other types of life insurance listed have different premium structures. Universal Life offers flexible premiums and an adjustable death benefit but does not typically feature a planned increase after an initial period. Whole Life insurance comes with a consistent premium throughout the policy's life. Term Life insurance generally has a fixed premium for the duration of the term without the increase characteristic of a Modified Premium Life policy.