LLQP Life Insurance · Component 2.1 · 30% of the exam
A limited-payment whole life policy (for example, 20-pay) is one where:
- AThe death benefit is paid over 20 years in instalments, so the beneficiary receives a steady income rather than a lump sum
- BCoverage lasts 20 years and then ends, in the same way as a 20-year renewable term policy
- Premiums are paid for a limited period, after which the policy is paid up and coverage continues for life
- DPremiums are lower than ordinary whole life, since the insurer collects them over a shorter period
Correct answer: C) Premiums are paid for a limited period, after which the policy is paid up and coverage continues for life
Limited-pay compresses the premium period. Each premium is higher than for a life-pay policy, but nothing is owed after the payment period. It fits clients who want coverage for life but do not want premiums in retirement.
Why the other options are wrong
- AThe death benefit is paid as a lump sum at death.
- BThe coverage lasts for life; only the premium-paying period is limited.
- DEach premium is higher, because the same lifetime cost is compressed.
Exam tip
Limited-pay: higher premiums for a set number of years, then paid up for life. Useful for clients who want no premiums in retirement.
Common mistake
Reading '20-pay' as coverage that ends after 20 years.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.