Aaliyah is a 37-year-old account manager at a large pharmaceutical company. She earns $300,000 a year plus bonuses. She meets with Theo, an insurance…

The Level Death Benefit option is the most suitable for Aaliyah's goal of keeping premiums low. In a universal life policy, the cost of insurance (COI) is based on the net amount at risk (NAAR), which is the difference between the death benefit and the policy's cash value. With a level death benefit, as the cash value grows, the NAAR decreases. A lower NAAR results in a lower COI charge, which helps keep the overall premium payments at a minimum compared to other options where the death benefit increases over time.

B. Level death benefit plus account value: This option results in a continuously increasing death benefit, which keeps the net amount at risk level, leading to higher cost of insurance charges and thus higher premiums.
C. Level death benefit plus cumulative premiums: This option also features an increasing death benefit as more premiums are paid, which increases the cost of insurance and requires higher premium payments.
D. Indexed death benefit: This option increases the death benefit annually to offset inflation, which directly increases the net amount at risk and consequently raises the cost of insurance and premiums.

1. IFSE Institute, Life Insurance (LLQP), (2023), Module 5: Individual Life Insurance Policies, Chapter 12: Universal Life Insurance, Section 12.4 "Death Benefit Options".

2. Saul S. Huebner, Kenneth Black, Jr., Bernard L. Webb, Life Insurance, 12th ed., (Prentice Hall, 1996), Chapter 8: "Universal Life Insurance," pp. 135-137. This text explains the mechanics of Option A (level death benefit) and Option B (increasing death benefit) and their impact on the net amount at risk and policy costs.

3. George E. Rejda, Michael J. McNamara, Principles of Risk Management and Insurance, 14th ed., (Pearson, 2022), Chapter 11: "Life Insurance," Section: "Universal Life Insurance," subsection on "Death Benefit Options." The text clarifies that the level death benefit option (Option A) results in lower mortality charges as the cash value increases, compared to the increasing death benefit option (Option B).