Texas General Lines — Life, Accident, Health and HMOLife InsuranceEasy
A 60-year-old individual is looking for a life insurance policy that provides a guaranteed death benefit, builds cash value, and for which premium payments are paid only for a specified, limited period, such as 20 years, but coverage extends for their entire life. Which type of policy would be most suitable?
- ATerm Life Policy
- BLimited-Pay Whole Life Policy
- CAdjustable Life Policy
- DUniversal Life Policy
Show answer & explanationAnswer & explanation
Correct answer: B. Limited-Pay Whole Life Policy
Limited-Pay Whole Life policies are a type of Whole Life insurance where premiums are paid only for a specific period (e.g., 10-pay, 20-pay, or paid-up at age 65). After this period, the policy is fully paid up, but the coverage (and cash value growth) continues for the insured's entire life.
Why the other options are wrong
- A. Term life has no cash value and expires after a specified term.
- C. Adjustable life offers flexibility in premium and death benefit but doesn't specifically target a limited pay period with lifelong coverage as its defining feature.
- D. Universal life has flexible premiums and adjustable death benefits, but premiums are typically paid for the life of the policy, not a limited period.
Limited-Pay Whole Life
A type of Whole Life insurance where premiums are paid for a specific, limited period, but the policy provides lifetime coverage and guaranteed cash value accumulation.
- Lifetime coverage.
- Premiums paid for limited time.
- Guaranteed cash value and death benefit.
Memory trick: Limited-Pay: Pay less time, cover whole life.