What insurance policy starts with a low premium and then gradually increases over 5-10 years before stabilizing?

The correct answer is a graded premium whole life policy. This type of insurance is designed to appeal to individuals who may initially find it difficult to pay higher premiums. The structure of a graded premium whole life policy begins with a lower premium during the initial years—typically ranging from 5 to 10 years—which gradually increases over that period. After this adjustment phase, the premium stabilizes and remains constant for the remainder of the policyholder's life.

This design benefits the policyholder by providing them with lower initial costs, making it more affordable in the early years of the policy. As the insured's financial situation potentially improves, they can manage the higher premiums once the policy stabilizes. Additionally, like other whole life policies, a graded premium whole life policy offers lifelong coverage and builds cash value over time.

While modified whole life policies operate with initially lower premiums that eventually increase, the mechanism resembles the graded policy more closely when considering the gradual increase over a defined period before leveling out. Other policy types listed, such as adjustable life insurance and 20-pay life, have different structures that do not align with the specific characteristics of graded premium whole life policies.