South Carolina Life Insurance Practice Exam

What is a key feature of a limited payment whole life policy?

1. Premiums paid for a short term

2. Coverage for a fixed period

3. Cash value pays dividends

4. Only a death benefit

The correct answer is: Premiums paid for a short term

A key feature of a limited payment whole life policy is that premiums are structured to be paid over a shorter term compared to standard whole life policies. This means that the policyholder is not required to pay premiums for their entire life but instead has a defined period during which they must make these payments, often 10, 20, or 30 years. After completing these payments, the policy remains in force for the lifetime of the insured, and the coverage does not expire. This structure provides a financial advantage for those who may prefer to limit their premium payment duration while still securing lifetime coverage and allowing the cash value to accumulate. Unlike some other options, limited payment whole life policies do not merely provide temporary coverage or benefits that only last for a fixed period. They continue until death, thus providing a lifelong benefit along with the accumulation of cash value.