A whole life policy under which the policyowner pays premiums for a limited period, such as 10 or 20 years, after which the policy is fully paid up for life, is called:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Limited-pay whole life (for example, 10-pay or 20-pay life) concentrates the premium payments into a shorter period while providing permanent coverage. Because premiums are compressed into fewer years, each premium is higher than it would be under a level-pay whole life contract for the same face amount. Once the payment period ends, the policy is paid up and remains in force for life with no further premiums required. This pattern is one of the premium modes described under the policy types; other patterns include single premium, modified (lower initial premiums that later increase), and level premium.
Why the other options are wrong
- B) A modified premium policy charges lower premiums in the early years that rise to a higher level later; it does not become paid up.
- C) Single-pay life requires one premium at issue, not a 10- or 20-year payment period.
- D) Yearly renewable term provides temporary coverage that must be renewed annually and builds no paid-up status.
Memory hook
Limited-pay = pay hard for 10 or 20 years, then coverage is free forever. Compressed cost, permanent promise.