Final answer:
If J selects a monthly premium mode for his Whole Life insurance policy, the premium amount will stay consistent over the policy term because such policies are designed with level premiums (1). An actuarially fair premium charged to a group as a whole could lead to financial imbalance for the insurer if high-risk claims exceed the premiums collected.
Step-by-step explanation:
If J chooses a monthly premium payment mode on his Whole Life insurance policy, the correct statement is that the premium amount will remain the same throughout the policy term. A Whole Life insurance policy typically has both a death benefit and a cash value component. This type of policy is designed so that the premium remains level for the life of the policy, and part of the premium contributes to building cash value over time. This accumulated cash value can serve as an account for the policyholder's use under certain conditions.
Regarding the actuarially fair premium, insurance companies calculate premiums based on the risk associated with a certain group. If the insurance company charges an actuarially fair premium to the group as a whole rather than to each group separately, it means they are spreading the risk among all policyholders. This could potentially lead to undercharging high-risk individuals and overcharging those at lower risk. Therefore, the company's finances could suffer if high-risk individuals claim more than expected, undermining the fundamental law of insurance where payments must cover claims, company costs, and profits.