Arizona Life and Health Practice Exam

Which type of life insurance policy has premiums that are paid at specific intervals for a limited time?

1. Whole life insurance

2. Term life insurance

3. Limited pay life insurance

4. Universal life insurance

The correct answer is: Limited pay life insurance

Limited pay life insurance is characterized by its structure of requiring premiums to be paid for a predetermined period while providing lifetime coverage. In this type of policy, the policyholder pays premiums for a limited number of years, such as 10, 15, or 20 years, after which no further premiums are required, yet the policy remains in force for the insured's lifetime. This can be particularly appealing for individuals who wish to secure a lifelong policy but do not want financial obligations extending into retirement years. In contrast, whole life insurance involves premiums being paid for the lifetime of the insured, creating a savings component along with the death benefit. Term life insurance offers coverage for a specific period without a savings element and typically doesn't involve a limited payment schedule. Universal life insurance features flexible premiums and can vary in terms of payment duration, making it less predictable regarding the timeframe of premium payments. Thus, limited pay life insurance specifically aligns with the requirement of having premiums paid at specific intervals for a limited time while maintaining coverage for the indefinite future.