Texas General Lines — Life, Accident, Health and HMOLife InsuranceEasy
A client is looking for a life insurance policy that offers a guaranteed death benefit, guaranteed cash value growth, and requires premium payments only for a specified period, after which the policy is considered 'paid-up'. Which type of policy best fits these requirements?
- AUniversal Life
- BAnnual Renewable Term
- CVariable 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 cash value growth, with the unique feature of requiring premium payments for a specific, shorter period (e.g., 10-Pay, 20-Pay) after which no further premiums are due, but coverage continues for life.
Why the other options are wrong
- A. Universal Life offers flexible premiums and adjustable death benefits, but not necessarily a 'paid-up' period in the same sense as Limited-Pay Whole Life, and cash value growth is not always guaranteed at a fixed rate.
- B. Annual Renewable Term is temporary coverage with no cash value and increasing premiums.
- C. Variable Life has a death benefit and cash value that can fluctuate based on investment performance, and premiums are typically paid for life unless it's a 'single premium' version, which isn't implied here.
Limited-Pay Whole Life
A type of whole life insurance where premiums are paid for a specified period (e.g., 10, 20 years, or to age 65), after which the policy is fully paid-up, but coverage continues for the insured's entire life.
- Guaranteed death benefit.
- Guaranteed cash value growth.
- Premiums are higher than straight whole life for the payment period.
- Policy remains in force for life once paid up.
Memory trick: Whole Life's a tree, but 'Limited-Pay' means you stop watering after a set spree!