Final answer:
An adjustable life insurance policy offers the flexibility to change the face amount at various intervals, which allows policyholders to adjust their coverage as their needs change.
Step-by-step explanation:
An adjustable life insurance policy provides policyholders with the flexibility to modify the face amount at different intervals. This type of policy falls within the category of cash-value or whole life insurance, encompassing both a death benefit and a cash value component. The accumulated cash value operates as an account that policy owners can access under specific circumstances. Premiums paid by policyholders contribute to this cash reserve, which the insurance company may lend to others or allow policyholders to borrow against.
Charging an actuarially fair premium is crucial for the sustainability of the insurance company, ensuring it can cover the associated risks and obligations. Actuarial considerations, including the overall risk of the insured group, play a vital role in determining the appropriate premium levels for adjustable life insurance policies, facilitating the financial viability of the insurance provider.