What is the characteristic feature of a graded premium whole life policy?

A graded premium whole life policy is characterized by several premium increases during the initial years of the policy, typically within the first five to ten years. This means that the premiums start at a lower amount and gradually increase to a predetermined level, where they will remain consistent for the rest of the policy's life.

This design allows policyholders to ease into their premium obligations while still providing lifelong coverage. It is especially appealing to those who may anticipate higher income in the future, making it more manageable to start with lower payments.

The other options do not capture the essence of a graded premium structure. Consistent premiums throughout the policy period are indicative of whole life policies without any grading of premiums. The payout of dividends annually is a feature of participating policies, which can vary widely among different products, and does not specifically relate to the graded nature of premiums. Lastly, a decreasing face amount over time more closely aligns with term life or other forms of diminishing coverage, rather than the whole life products that maintain a fixed face amount, regardless of the premium payment structure.