Texas General Lines — Life, Accident, Health and HMOLife InsuranceMedium
A 35-year-old client is considering purchasing a life insurance policy that offers a guaranteed death benefit, but also wants the flexibility to pay premiums for only a limited period, after which the policy remains in force without further payments. Which type of policy would BEST suit their needs?
- AUniversal Life
- BTerm Life
- CVariable Universal Life
- DLimited-Pay Whole Life
Show answer & explanationAnswer & explanation
Correct answer: D. Limited-Pay Whole Life
Limited-Pay Whole Life policies offer a guaranteed death benefit and allow the policyholder to pay premiums over a specific, limited period, after which no further payments are required, but coverage continues for life.
Why the other options are wrong
- A. Universal Life offers flexible premiums but typically requires ongoing payments for lifetime coverage.
- B. Term Life policies only provide coverage for a specific period and do not build cash value or offer lifetime coverage.
- C. Variable Universal Life offers investment choices and flexible premiums, but not a defined limited payment period for guaranteed lifetime coverage.
Limited-Pay Whole Life
A type of whole life insurance where premiums are paid for a specified period (e.g., 10-pay, 20-pay, or paid-up at 65), but coverage extends for the insured's entire life.
- Guaranteed death benefit
- Premiums paid for a limited time
- Builds cash value
- Coverage for life
Memory trick: Whole life, but with a specific payment 'limit' like a finish line.