Final answer:
The not valid option for an Adjustable Life Policy is Guaranteed fixed premiums for life. Adjustable Life Policies are flexible and allow for premium adjustments and coverage changes, though this does not entail fixed premiums throughout the policy's life.
Step-by-step explanation:
Among the options for an Adjustable Life Policy, the valid choices include flexibility in premium payments, the ability to change coverage amounts, and cash value accumulation. However, the Guaranteed fixed premiums for life is the option that is not valid for an Adjustable Life Policy. Adjustable Life Policies are known for their flexibility, not for having guaranteed premiums, as the premiums may change over time based on the alterations in the coverage and other factors.
Actuarially Fair Premium
In an actuarial context, if an insurance company were offering life insurance separately to each group of 50-year-old men with different family cancer histories, the premiums would differ. For those with a family history, the premium would be based on a 1 in 50 chance of dying in the next year, while for those without, it would be based on a 1 in 200 chance. When the insurance company cannot discern between groups, the actuarially fair premium would be a weighted average based on the total risk pooled together.
If an insurance company charges the actuarially fair premium to the entire group without differentiating based on cancer history, it may result in adverse selection, where those with a higher risk are more likely to buy the insurance, potentially leading to losses for the insurance company.