Mark, a 45-year-old business owner in British Columbia, has a Universal Life policy with a Level Cost of Insurance (COI) structure. He has consistently paid his planned premiums. Which of the following statements accurately describes the COI payments within his policy?

Question: Mark, a 45-year-old business owner in British Columbia, has a Universal Life policy with a Level Cost of Insurance (COI) structure. He has consistently paid his planned premiums. Which of the following statements accurately describes the COI payments within his policy?

Answer options:

• The COI payments remain constant for the life of the policy, regardless of age.
• The COI payments decrease over time as the policy's cash value grows.
• The COI payments are calculated annually based on Mark's attained age and increase each year. ✅ The COI payments incorporate future mortality costs smoothed out over the premium paying period.

Correct answer: The COI payments incorporate future mortality costs smoothed out over the premium paying period.

Explanation: With a Level COI, future mortality costs are averaged and incorporated into a level charge over the premium-paying period, ensuring the COI payment does not increase year-over-year based on attained age.