A client purchases a whole life policy with premiums payable for only 20 years, after which the policy is fully paid up and coverage continues for life. This policy is:

Why A is correct

A limited-pay whole life policy is permanent insurance whose premiums are concentrated into a limited period — here 20 years — after which the policy is paid up and the death benefit continues for the insured's lifetime. Because premiums are compressed into fewer years, each premium is higher than under straight whole life, where premiums are paid for life. Unlike term, it builds cash value and never expires solely from reaching the end of a term, and unlike annual renewable term, the premium is level and coverage does not end at a set age.

Why the other options are wrong

• B) Straight or ordinary whole life requires premiums to be paid for the insured's entire lifetime. A 20-pay policy compresses all premiums into 20 years and then becomes fully paid up.
• C) Term insurance provides temporary protection for a stated term and builds no cash value. The policy described is permanent insurance, so it cannot be a term product.
• D) Annual renewable term has premiums that rise each year and coverage that typically ends at a set age. The described policy has level premiums and continues for life.

Memory hook

20-pay life = cram a lifetime of premiums into 20 years, then coast.