Final answer:
A whole life policy with level death benefit, level premium, and cash savings value is known as Straight life insurance. Actuarially fair premiums are calculated according to the risk of each insured group or based on the average risk if individual data is unavailable. so, option C is the correct answer.
Step-by-step explanation:
The type of life insurance plan characterized by a level death benefit, a level premium, and a cash savings value is known as C. Straight life insurance. This plan, which is also referred to as cash-value (whole) life insurance, offers both a death benefit and accumulates a cash value that can serve as a savings account for the policyholder's use.
When discussing actuarially fair premiums, insurers determine these by considering the risk associated with insuring individuals or groups. For instance, if an insurance company were selling life insurance separately to groups with different family cancer histories, it would calculate premiums based on the statistical risk of death within each group. In contrast, if the insurer sells to a mixed group without individual risk information, the fair premium will be an average based on the entire population's risk.
Actuarially fair premiums aim to match the expected payouts with the total premiums collected. If the insurance company tries to charge a single actuarially fair premium to the whole group rather than to each group separately, it may face financial losses or gain due to adverse selection, where individuals with higher risk are more likely to purchase insurance, thereby skewing the risk pool.