Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Mar 16, 2022

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Indeterminate premium life insurance is one of several types of whole life insurance. Its distinguishing factor is that it has a provision for adjustable premiums. In short, they can change.

When you take out an indeterminate premium whole life insurance policy, the premium payments are lower than for other comparable whole life policies. There is a fixed maximum. So buyers know their life insurance premium will never be higher than this dollar amount, but there’s no guarantee on what it will be under that line.

Generally speaking, the price does not bounce around or jump all at once. As needed, the insurer makes adjustments to the premium, based on mortality, investment earnings and company expenses. So the cost is reassessed on a regular basis and adjusted based on measurable factors by the life insurance company. Your premium may even go down. Buyers should budget for the maximum possible premium, though.

To learn the pros and cons of indeterminate premium life insurance policies, then read on. Also, be sure to enter your zip code above for free insurance quotes!

What are the advantages of indeterminate premium life insurance?

There are many advantages to indeterminate premium life insurance. It allows you to buy more insurance than you might otherwise be able to afford right away because premium payments are lower than for other types of whole life coverage. This is excellent for someone who is confident that his or her salary will increase, or other payments will decrease within a year.

Even though it looks as if it would be difficult to budget with an indeterminate premium life insurance plan, it is actually quite easy. Premium payments only change yearly. In addition, you know that your premium will not surpass the maximum amount agreed upon at the beginning of your policy. You also have the advantage of possibly lower premiums if your insurer finds that expenses are lower, investment earnings are better, or mortality is different from anticipated. Generally, people get more generous payouts on the types of life insurance they’d otherwise get for the same price.

Of course, if the maximum payment won’t fit into your budget, or you aren’t confident you’ll be making a significant amount more in a year, this may not be the right choice. An insurance agent can advise you on your options and pricing, but you have to look at your finances and decide what fits into them.

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What are alternatives to indeterminate premium life insurance?

If you find that you are unsure of whether to take out indeterminate premium life insurance, there are a variety of other alternatives available to you in the field of whole life insurance. Each is slightly different and appeals to different people.

  • Participating whole life insurance is a form of whole life coverage that may provide you with income in the form of dividends. These are only paid during the years when insurance companies find that they have earned more than anticipated from investments, they experienced fewer deaths and/or they paid out less in expenses. When dividends are paid, policyholders can use them to help pay their premiums, increase the value of their policy, accumulate the payments or cash them out.
  • Non-participating whole life insurance coverage is whole life coverage that has a steady premium and value throughout the entire time you carry it, or for the rest of your life. Many people appreciate the fact that premiums are somewhat lower than participating whole life coverage and that they are fixed. There are no dividends from this type of policy.
  • Level premium whole life insurance is a type of plan that allows you to opt for participating or non-participating insurance and the premiums hold steady throughout your life. You will pay for this type of coverage until your death. These plans actually overcharge in the beginning and undercharge as you age. Premiums are invested and a cash value builds with this type of coverage.
  • Limited payment whole life insurance (permanent life insurance policy) is another variation of participating or non-participating life insurance. You pay high premiums for a set number of years or until a certain age and the policy continues in effect until your death. It is advantageous for anyone who wants to retire without the stress of an annual life insurance premium in their budget.

The final type of policy is somewhat less common. It is called single premium whole life insurance and can be non-participating or participating. It is paid in full when the policy is taken out. Because of the hefty investment, such policies have cash value right away and can be used as loan value.

Variable life insurance policies do not pay a guaranteed interest rate but instead allow the policyholder to participate in the long-term gains of the stock, bond, and real estate markets.

The Bottom Line

A whole life policy (or a permanent life insurance policy) has different types of premium, and an indeterminate premium is one of them. The indeterminate premium will most probably vary from year to year. Its distinguishable characteristic is that this type of insurance has a provision for adjustable premiums. The premium changes depending on mortality, investment earnings and company expenses. It’s possible that your premium can go down, but it will never go over a pre-determined amount.

Assessing Your Needs Before purchasing a life insurance policy, you should consider your financial situation and the standard of living you want to maintain for your dependents or survivors.

Get started today with the life insurance quote tool provided on this page. Enter your zip to start!