Which statement best describes the relationship between the premium and the payment period for a whole life policy?

• A. Premiums are unrelated to payment period
• B. The shorter the payment period, the higher the premium
• C. Longer payment period yields higher premium
• D. The shorter the payment period, the lower the premium

Answer: (B)

For a whole life policy, the amount you pay each year (the premium) is tied to how long you agree to pay it. If you choose to pay off the policy in a shorter period, the insurer must recover the same cost of insurance in fewer payments, so each premium payment is higher. If you stretch the payments over a longer period, the annual premium is lower because the cost is spread out over more years (though you may end up paying more in total over time). So the statement that the shorter the payment period, the higher the premium is the best description.