Under a 20-pay life policy, the policyowner pays premiums for 20 years. After the premium-paying period ends, the policy:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A limited-payment whole life policy, such as 20-pay life or paid-up-at-65, requires premiums for only a specified number of years or until a specified age. After the premium-paying period ends, the policy is fully paid up: it remains in force for the insured's entire life, no further premiums are due, and the death benefit stays payable. The cash value continues to support the coverage and typically keeps growing on a tax-deferred basis. This contrasts with continuous-premium whole life, which requires premiums for the insured's lifetime, and it offers a way to compress premium payments into a shorter window.
Why the other options are wrong
- B) The policy is designed to be fully paid up after 20 years, so no additional premiums are needed to remain in force; lapsing would defeat the purpose of the product. The owner keeps lifetime coverage without further premium outlays.
- C) No conversion occurs; the contract remains whole life coverage that is simply fully paid, not transformed into a different product type. Conversion is a term insurance feature, not a limited-payment whole life feature.
- D) The cash value is not paid to the owner; the coverage continues with the cash value funding the future mortality risk and reserves. Surrender is required to access the cash value, which is not what happens here.
Memory hook
20-pay life: pay for 20 years, protected for life—like paying off a mortgage on coverage.