Life License Qualification Program (LLQP) Practice Exam

Which provision typically governs how premiums can be made under a life insurance policy?

1. Insuring

2. Consideration

3. Premium Mode

4. Assignment provision

The correct answer is: Premium Mode

The correct response is rooted in the understanding of life insurance policy provisions. The "Premium Mode" provision specifically governs how premiums are to be paid under a life insurance policy. This includes the frequency of payments, such as annual, semi-annual, quarterly, or monthly options that the policyholder can choose from. This provision is essential as it determines the timing and method of premium payment, which can impact the policy’s active status and the accumulation of cash value. Moreover, while the consideration provision deals with the concept that the premiums paid are the consideration exchanged for the coverage provided by the life insurance policy, it does not dictate the mechanics of how those premiums are to be paid. Similarly, the insuring provision outlines the coverage provided but does not address payment specifics, and the assignment provision relates to the transfer of rights and benefits under the policy rather than the payment of premiums. Understanding the distinction between these provisions helps clarify why the Premium Mode is central to managing premium payments in life insurance.