Level premium term life insurance policies have premiums that are averaged over the policy period. True or false?

• A. True
• B. False; premiums are constant
• C. False; premiums decrease
• D. False; premiums are unpredictable

Answer: (A)

Level premium means the same amount is paid each year for the term. The premium is determined by pricing the policy to cover the expected average cost of providing the death benefit over the entire term, using mortality rates and interest assumptions. In other words, the insurer sets a level annual premium that, on average, equals the cost of benefits and expenses across all years of the policy. That’s why the statement is true: the premium is effectively an average cost spread evenly over the policy period. The other options aren’t correct because the premium isn’t intended to rise, fall, or be unpredictable during the term—it’s fixed to smooth the cost over time.