Question

M purchases a $70,000 life insurance policy with premium payments of $550 a year for the first five years. After that, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain $70,000 throughout the life of the policy. What type of policy has M purchased?

a) Term life insurance
b) Whole life insurance
c) Universal life insurance
d) Graded premium whole life insurance

Answer 1

M has purchased a graded premium whole life insurance policy.

Step-by-step explanation:

M has purchased a graded premium whole life insurance policy. This type of policy starts with lower premiums that gradually increase over time. In this case, M pays $550 a year for the first five years and then the premium increases to $800 per year. The face amount of the policy remains $70,000 throughout its duration.