Texas Life Agent Practice Exam

Which of the following is an example of a limited-pay life policy?

1. Life paid-up at age 65

2. Whole life

3. Universal life

4. Term life

The correct answer is: Life paid-up at age 65

A limited-pay life policy is one where the policyholder pays premiums for a predetermined number of years or until a certain age, after which no further premiums are required, but the coverage continues for the lifetime of the insured. In the case of a policy that is "paid-up at age 65," the insured pays premiums only until they reach the age of 65, at which point the policy is fully paid and remains in force until death. This aligns precisely with the characteristics of a limited-pay life policy, as it provides lifetime coverage while limiting the payment term. In contrast, whole life policies typically involve a lifetime of premium payments with no specific end point unless it is a limited pay variation, which isn't the traditional whole life concept. Universal life insurance has flexible premiums and is not limited to a specific payment period, and term life policies only cover the insured for a specified term with no cash value or payment beyond that term, thus do not fit the limited-pay description either.