Maryland Life and Health Insurance License Practice Exam

A limited payment whole life policy offers which of the following?

1. Lifetime protection

2. Short-term coverage

3. Term coverage only

4. Universal life features

The correct answer is: Lifetime protection

A limited payment whole life policy provides lifetime protection to the policyholder. This type of policy is designed so that the insured pays premiums over a specified period, such as 10, 20, or 30 years, after which no further premiums are required, but the coverage remains in force for the life of the insured. Lifetime protection is a critical feature of whole life policies, as they guarantee a death benefit to the beneficiaries regardless of when the insured passes away, provided premiums are paid as agreed during the initial payment period. Once the limited payment period is complete, the policy will continue to accumulate cash value, and the policyholder experiences the security of being insured for life without further payment obligations. In contrast, short-term coverage would not accurately reflect the characteristics of a limited payment whole life policy, as the emphasis is on lifelong protection rather than a finite period. Term coverage refers specifically to temporary insurance solutions that last for a predetermined term without the cash value benefits associated with whole life policies. Additionally, universal life features involve flexible premiums and adjustable death benefits, which differ from the fixed structure of a limited payment whole life policy. Therefore, lifetime protection is the most appropriate description of what a limited payment whole life policy offers.