A whole life policy charges a lower premium during the first three years and a higher level premium for the remainder of the insured's life. This policy structure is called:

Why A is correct

Modified whole life is a permanent policy that charges a reduced premium for the first few years, usually three to five, and a higher level premium thereafter. The initial discount helps younger or cash-constrained buyers afford coverage, and the premium then steps up to a level that fully funds the policy over the insured's lifetime. Because it remains in force for life and builds cash value, it is still whole life rather than term, and the higher premium continues for the rest of the insured's life rather than being paid up in a limited number of years.

Why the other options are wrong

• B) Limited-pay whole life charges premiums only for a set period, such as 20 years or to age 65, after which the policy is fully paid up with no further premiums due.
• C) Variable whole life ties cash values to a separate account and involves securities regulation; the premium pattern described here is unrelated to investment risk. Once the limited payment period ends, the policy is fully paid up and no further premiums are due.
• D) Single-premium whole life is paid for with one lump sum at issue, and no further premiums are ever due under the policy. Variable products expose the owner to investment risk in a separate account, which is not described here.

Memory hook

Modified = cheaper now, full cost later, still permanent. A head start on premium, not a free ride.