In a graded/graduated premium whole life policy, how does the premium change over time?

In a graded or graduated premium whole life policy, the premium is designed to start at a lower amount and gradually increase over a specified period, typically for the first few years of the policy. This structure reflects the idea of making the insurance more affordable initially, while the subsequent increases are planned to accommodate the policyholder's increasing income or financial capacity as time goes on.

The graduated nature of the premiums means that each year, the premium amount will go up according to a predetermined schedule. By the end of the initial grading period, the premium usually levels off and becomes constant for the remainder of the policy, converting into a whole life premium structure. This progressive approach allows policyholders to budget for higher payments in the future when they may be more capable of handling them, thus strategically managing cash flow.

Overall, this design makes the policy accessible at its onset, ensuring that individuals can obtain life insurance without being burdened excessively by higher premiums in the early years. It’s essential for policyholders to understand this premium structure as it affects their long-term financial planning and the affordability of maintaining their policy.