Which of the following is the best example of a limited pay life insurance policy?

• A. Term life policy with level premiums
• B. Whole life policy with premiums paid up after 20 years
• C. Universal life policy with flexible premiums
• D. Whole life policy with premiums paid for life

Answer: (B)

Limited pay life insurance is a permanent policy where premiums are paid for a set period, after which no further payments are due and the coverage lasts for the insured’s lifetime. The idea is to finish paying earlier while still maintaining lifelong protection and an accumulating cash value.

The best example here is a whole life policy with premiums paid up after 20 years. That exactly shows paying for a finite period (20 years) and then having a paid-up policy that remains in force for life. The other options don’t fit: term life with level premiums ends after a term, not for life; universal life with flexible premiums allows ongoing adjustments and isn’t defined by a fixed paid-up period; and a whole life policy with premiums paid for life requires continuing payments indefinitely.