Ace the Life Agent License Exam 2025 – Ignite Your Path to Success!

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What is the "sliding scale" method related to in life insurance?

A method of prioritizing claims based on severity

A formula adjusting premiums according to risk levels

The "sliding scale" method in life insurance refers to a formula that adjusts premiums according to risk levels. This approach allows insurers to evaluate the risk associated with insuring an individual and then tailor the premium to that specific risk. For instance, individuals with higher health risks or lifestyle factors that could lead to a shorter life expectancy may be charged higher premiums. Conversely, those deemed to have lower risk profiles can benefit from reduced premiums. This method is crucial for actuarial assessments, as it enables insurance companies to remain profitable while still providing coverage to a wide range of policyholders.

The other options do not accurately represent the concept: prioritizing claims based on severity does not involve premium determination, and determining beneficiary amounts or assessing past premiums does not relate to risk assessment in the context of premium calculations.

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A technique for determining beneficiary amounts

A way to assess the policyholder's past premiums

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