Colorado Life Producer License Practice Test

What does limited pay whole life insurance require in terms of premium payments?

1. Payments continue until age 75

2. Payments are made for a limited number of years

3. Payments are only made until age 100

4. Payments can be indefinite but at a lower rate

The correct answer is: Payments are made for a limited number of years

Limited pay whole life insurance requires that premium payments are made for a specific, predetermined period rather than the entire lifetime of the policyholder. This structure allows the insured to complete their premium payments in a shorter timeframe, which is typically set at a certain number of years such as 10, 15, or 20. Once these payments are made, the policy remains in force for the entirety of the policyholder's life, without requiring additional payments after this limited period. The concept behind limited pay whole life insurance is appealing to many because it allows for full insurance protection while alleviating the financial burden of lifetime premium payments. After the limited payment period, the policyholder benefits from the cash value accumulation and death benefits without making ongoing payments.