Which statement correctly describes fixed premium vs flexible premium policies?

• A. Flexible premium payments must be equal every year
• B. Fixed premium changes with market conditions
• C. Fixed premium keeps the same payment; flexible premium allows changes
• D. Flexible premium is always more expensive

Answer: (C)

Premium structure in life insurance defines whether payments stay level or can vary over time. In a fixed premium policy, the payment amount is set and remains the same each period, providing predictable budgeting and steady funding of the policy’s guaranteed benefits and cash value. In a flexible premium policy, like universal life, the policyholder can adjust the amount and timing of payments; there may be a minimum required premium to keep the policy in force, and paying more can increase cash value while paying less can risk lapse. This distinction—level payments versus adjustable payments—is why the statement that fixed premium keeps the same payment and flexible premium allows changes is the correct description.