Risk increases as age increases
It is convenient to the policyholder
It is convenient to the insurer
All of the above
Answer is Right!
Answer is Wrong!
The correct answer is: D. All of the above
- Risk increases as age increases. This is because older people are more likely to experience a claim than younger people. For example, older people are more likely to have health problems, which could lead to a claim for medical expenses. They are also more likely to die, which could lead to a claim for death benefits.
- It is convenient to the policyholder. Level premiums are easier to budget for than increasing premiums. This is because the policyholder knows exactly how much they will have to pay each month, year, or other period.
- It is convenient to the insurer. Level premiums make it easier for the insurer to predict their future costs. This is because they know how much they will have to pay out in claims each year. This makes it easier for them to set their rates and make a profit.
It is important to note that there are some types of insurance policies that do not charge level premiums. For example, car insurance premiums typically increase as the policyholder gets older and their driving record worsens.