Oklahoma Life Producer Practice Exam

What term refers to the amount the insured must pay to keep the policy in force?

1. Maximum Premium

2. Target Premium

3. Minimum Premium

4. Death Benefit

The correct answer is: Target Premium

The correct answer is identified as the Target Premium, which is a critical concept in life insurance policies. The Target Premium represents the recommended amount that the policyholder should pay to keep the insurance policy in force while building cash value adequately. This figure is generally set by the insurer based on the policy’s design and is aimed at assuring that the policy remains active and meets its long-term objectives. Understanding the Target Premium is essential because it reflects a balance between affordability for the policyholder and the insurer’s need to ensure the policy remains effective over time. If payments are made at or above this level, it helps maximize policy performance, particularly in products that accumulate cash value. The other terms do not accurately describe this particular obligation of the insured. The Maximum Premium refers to the highest amount that can be charged for a premium but does not relate directly to keeping the policy active. The Minimum Premium can imply a lower threshold that still keeps the policy in force but might not consider the best financial strategy for the policyholder. The Death Benefit refers to the amount paid to beneficiaries upon the death of the insured, which is a different aspect of the life insurance policy entirely. Understanding these distinctions reinforces the importance of the Target Premium in determining both the viability and effectiveness of a life insurance