Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
In a universal life policy, the premium amount the insurer is contractually guaranteed never to charge more than is the:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A universal life policy illustrates an initial (current) premium based on current interest and mortality assumptions, but the contract guarantees a maximum premium, the highest amount the insurer may ever charge. The initial illustrated premium is not guaranteed and can rise if interest rates or expenses worsen; the guaranteed maximum premium is the contractual ceiling. This distinction is fundamental to understanding the flexible-premium nature of universal life.
Why the other options are wrong
- B) The initial illustrated premium is an estimate based on current assumptions and can change; it is not the contractual ceiling.
- C) The target premium is the amount needed to keep the policy on target to remain in force as illustrated, but it is not a guaranteed maximum.
- D) The minimum premium is the amount below which the policy lapses; it is not the ceiling the insurer can charge.
Memory hook
Guaranteed maximum premium = the roof on premium; the illustrated premium is just today's weather report.