Rhode Island Life Insurance Practice Exam

Which statement is correct regarding the premium payment schedule for whole life policies?

1. Premiums are payable for a fixed period

2. Premiums are payable throughout the insured's lifetime

3. Premiums are only payable until age 65

4. Premiums can be skipped during the policy term

The correct answer is: Premiums are payable throughout the insured's lifetime

The correct answer is that premiums for whole life policies are payable throughout the insured's lifetime. Whole life insurance is designed to provide coverage for the entire life of the policyholder, as long as premiums are paid. This means that the policy remains in force until the insured passes away, which is a key feature of whole life insurance. This structure is important because it also builds cash value over time, which can be accessed by the policyholder while they are still living. The premium payments contribute to both the insurance coverage and the accumulation of cash value, which can offer liquidity or serve as a loan resource in the future. The other options do not align with the standard provisions of whole life policies. Premiums for a fixed period would typically apply to term life insurance or certain limited-payment policies, rather than whole life. The notion that premiums are only payable until age 65 does not apply, as whole life policies involve ongoing premium payments regardless of age. Lastly, the ability to skip premium payments usually pertains to policies that have an automatic premium loan provision, which is not a standard feature that would allow to skip payments permanently during the policy term without consequences. Whole life policies typically require consistent premiums to maintain the coverage and ensure the policy's intended benefits.