What happens to the premium when a policy owner partially surrenders an adjustable life policy?

What happens to the premium when a policy owner partially surrenders an adjustable life policy?

• A. The Premium Stays Level
• B. The Premium Goes Up Proportionately
• C. The Premium Goes Down
• D. The Premium Goes Down by the Amount of the Withdrawal

Answer: (C)

When a policy owner partially surrenders an adjustable life policy, the premium generally goes down. This is because a partial surrender reduces the policy's death benefit. As the total amount at risk decreases, the insurer requires a lower premium to maintain the policy. In adjustable life insurance, the premiums can be adjusted based on changes in coverage or cash value. A partial surrender decreases the cash value and also the death benefit, which in turn reduces the premium needed to keep the policy active. Understanding how partial surrenders affect premiums is important because it helps policy owners make informed decisions regarding their insurance coverage and financial planning needs.

When a policy owner partially surrenders an adjustable life policy, the premium generally goes down. This is because a partial surrender reduces the policy's death benefit. As the total amount at risk decreases, the insurer requires a lower premium to maintain the policy.

In adjustable life insurance, the premiums can be adjusted based on changes in coverage or cash value. A partial surrender decreases the cash value and also the death benefit, which in turn reduces the premium needed to keep the policy active.

Understanding how partial surrenders affect premiums is important because it helps policy owners make informed decisions regarding their insurance coverage and financial planning needs.