Which of the following is a method to reduce the cost of life insurance?

Which of the following is a method to reduce the cost of life insurance?

• A. Restricting conversion features
• B. Extending premium payment period evenly
• C. Increasing the policy face value
• D. Adding riders to the policy

Answer: (A)

Cost is driven by the features and type of the policy. A conversion feature lets you switch a term policy to permanent coverage without proving insurability, which adds future value but also increases the insurer’s long-term risk and administration costs. Removing or restricting this feature lowers the policy’s ongoing cost because you’re reducing those extra obligations and potential premium increases down the line. Extending the premium-pay period evenly may lower the annual premium, but it doesn’t reduce the overall amount paid for the policy; you’ll typically pay more in total over time. Increasing the face amount raises the death benefit and the premium, not lowers it. Adding riders adds extra coverage and costs beyond the base policy. So restricting the conversion feature is the clear way to reduce cost.

Cost is driven by the features and type of the policy. A conversion feature lets you switch a term policy to permanent coverage without proving insurability, which adds future value but also increases the insurer’s long-term risk and administration costs. Removing or restricting this feature lowers the policy’s ongoing cost because you’re reducing those extra obligations and potential premium increases down the line.

Extending the premium-pay period evenly may lower the annual premium, but it doesn’t reduce the overall amount paid for the policy; you’ll typically pay more in total over time. Increasing the face amount raises the death benefit and the premium, not lowers it. Adding riders adds extra coverage and costs beyond the base policy. So restricting the conversion feature is the clear way to reduce cost.