Tennessee Life Producer Practice Exam

Which of the following policies would be categorized as a Limited-Pay Life policy?

1. Whole Life with premium payments until age 65

2. Life Paid-Up at age 70

3. Term Life Insurance

4. Universal Life Insurance

The correct answer is: Life Paid-Up at age 70

A Limited-Pay Life policy is designed to allow the policyholder to pay premiums for a limited time rather than for the entirety of their life. This kind of policy typically provides lifetime coverage as long as the premiums are paid according to the terms of the policy. In this case, the option indicating a policy that is "Paid-Up at age 70" means that the policy is fully paid for by the time the insured reaches age 70. This aligns perfectly with the characteristics of a Limited-Pay Life policy, as it allows the policyholder to stop premium payments after reaching a certain age while still benefiting from lifelong coverage. In contrast, the other options reflect different premium payment structures. For instance, the whole life policy requiring payments until age 65 involves a longer premium-paying period, thus it is not categorized as limited. Term life insurance is designed to provide coverage for a specific period, typically not providing any cash value or lifelong benefits after that period. Universal life insurance offers flexible premium payments and does not fall under a limited-pay structure as it can involve payments made throughout the insured's life.