A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n)

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n)

Explanation:
This question tests recognizing a limited-pay permanent life policy. In a limited-pay policy, you finance the policy with premiums for a fixed period (for example, 10, 20, or 20-pay life), after which the policy is paid up but remains in force for the insured’s life. The policy still provides lifelong coverage and usually builds cash value, but you stop paying after the predetermined number of years. This differs from universal life, which features flexible premiums and an adjustable death benefit; whole life typically requires level premiums for the insured’s entire life; and term life provides temporary coverage with no cash value. All point to why the described arrangement is specifically a limited-pay policy.

This question tests recognizing a limited-pay permanent life policy. In a limited-pay policy, you finance the policy with premiums for a fixed period (for example, 10, 20, or 20-pay life), after which the policy is paid up but remains in force for the insured’s life. The policy still provides lifelong coverage and usually builds cash value, but you stop paying after the predetermined number of years.

This differs from universal life, which features flexible premiums and an adjustable death benefit; whole life typically requires level premiums for the insured’s entire life; and term life provides temporary coverage with no cash value. All point to why the described arrangement is specifically a limited-pay policy.

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