What does "adjustable premium" mean in life insurance?

"Adjustable premium" in life insurance refers to a premium that can be modified or changed based on the needs and preferences of the policyholder. This feature allows policyholders greater flexibility in managing their insurance costs and coverage over time. For instance, an adjustable premium might allow for increases or decreases depending on changes in financial circumstances, such as income fluctuations or shifts in financial priorities.

This flexibility is particularly beneficial during different life stages when a policyholder's financial situation or coverage needs may vary significantly. The ability to adjust premium payments helps ensure that the life insurance remains affordable and aligned with the policyholder's current situation.

In contrast, other options do not accurately depict an adjustable premium. A fixed cost remains constant throughout the policy's duration and does not allow for any changes. A decreasing premium implies a different structure of pricing which is not inherent to the concept of adjustability, and a penalty fee for late payments does not relate to premium adjustment at all but rather addresses compliance with payment schedules.