PSI Life Exam Practice Test

What does a limited payment whole life policy provide?

1. Only temporary coverage

2. Lifetime protection with limited premium payments

3. A single payment option at the end of the term

4. Investments in stocks and bonds

The correct answer is: Lifetime protection with limited premium payments

A limited payment whole life policy provides lifetime protection while allowing the policyholder to pay premiums for only a specified period, rather than throughout their entire life. This structure enables individuals to have coverage that extends for their entire lifetime, ensuring a death benefit is available to beneficiaries regardless of when the policyholder passes away. The limited payment nature means that after completing the set premium payments, no further payments are required, yet the policy still retains its full value and protection. This type of policy usually appeals to those who want the assurance of lifelong coverage without the financial commitment of paying premiums for their entire life. It highlights a key characteristic of whole life insurance—permanence—combined with the convenience of paying premiums only for a select number of years. In contrast, other choices do not accurately describe the features of a limited payment whole life policy. For instance, temporary coverage is not aligned with the objectives of this type of policy, and the single payment option at the end of the term refers to other insurance structures, such as single-premium policies. Additionally, investments in stocks and bonds are typically not a feature of whole life policies, as they are primarily designed for guaranteed life insurance coverage rather than investment purposes.