What happens when the premium is adjusted on an adjustable whole life policy?

When the premium is adjusted on an adjustable whole life policy, it typically affects both the premium and the face amount. Adjustable whole life policies are designed to provide flexibility; policyholders can modify the premium payments based on their financial situations.

When the premium is increased, the face amount can also increase as the policyholder may opt for a higher death benefit in conjunction with the higher premium payment. Conversely, if the premium is decreased, the face amount may decrease as well, reflecting the reduced risk that the insurer is taking on. This dynamic allows policyholders to tailor their insurance coverage to their changing financial needs and circumstances.

In contrast, options suggesting that the premium adjustment has no effect on the face amount or that it always results in an increase of the face amount do not accurately capture how adjustable whole life policies operate. Additionally, the choice that claims a decrease in cash value does not directly relate to the relationship between premium adjustments and the face amount or overall policy value. This interconnected structure is fundamental to understanding how adjustable whole life policies function.