Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceMedium
A client, aged 45, is looking for a life insurance policy that offers a guaranteed death benefit and level premiums for the entire duration of the policy, which is intended to cover them until age 65. The policy should also accumulate cash value that they can access if needed. Which type of policy best fits these requirements?
- AUniversal Life
- BLimited Pay Whole Life
- CDecreasing Term
- DAnnual Renewable Term
Show answer & explanationAnswer & explanation
Correct answer: B. Limited Pay Whole Life
Limited Pay Whole Life insurance provides a guaranteed death benefit, level premiums for a specified period (e.g., to age 65), and accumulates cash value, perfectly matching the client's needs.
Why the other options are wrong
- A. Universal Life has flexible premiums and death benefits, but the premiums are not necessarily level for a specified duration like a limited pay policy, and cash value accumulation can vary.
- C. Decreasing Term has a decreasing death benefit and no cash value.
- D. Annual Renewable Term has increasing premiums and no cash value accumulation.
Limited Pay Whole Life
A type of whole life insurance where premiums are paid for a specified period or until a certain age, after which no further premiums are due, but coverage continues for life.
- Premiums paid for a limited time (e.g., 20-pay, paid up at 65).
- Coverage extends for the insured's entire life.
- Guaranteed cash value accumulation.
- Guaranteed level death benefit.
Memory trick: Whole life is a tree, growing cash, with branches for different payment styles.