Oklahoma Life Producer Practice Exam

Which payment method is NOT standard for a Whole Life policy?

1. Limited Pay

2. Continuous Premium

3. Decreasing Premium

4. Single Premium

The correct answer is: Decreasing Premium

A Whole Life policy typically has several standard payment methods that policyholders can choose from. The common methods include Limited Pay, Continuous Premium, and Single Premium. Each of these options allows the policyholder to pay their premiums in a way that fits their financial situation. Limited Pay refers to a policy where the insured pays premiums for a specified period, after which the coverage remains in force for the life of the insured without any further premium payments. Continuous Premium involves paying premiums throughout the life of the policy, which is the most traditional approach. A Single Premium option allows the policyholder to make one lump-sum payment for the entire life coverage immediately. In contrast, a Decreasing Premium method is not standard for Whole Life policies. Instead, this type of payment structure is generally associated with term life insurance policies or specialized products where the coverage amount decreases over time, reflecting the decreasing need for coverage as financial obligations lessen (such as a mortgage). Thus, the identification of Decreasing Premium as not being a standard payment method for Whole Life insurance highlights the specific traditional structures this type of policy embraces, which prioritize stability and guaranteed benefits rather than variable or decreasing coverage amounts.