Life License Qualification Program (LLQP) Practice Exam

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What is a defining feature of a Limited-Pay Life policy?

Graded death benefits
No cash value
Premium payments are paid to age 100
Premium payments limited to a specified number of years

The correct answer is: Premium payments limited to a specified number of years

A defining feature of a Limited-Pay Life policy is that premium payments are limited to a specified number of years. This means that the policyholder pays premiums for a predetermined period, after which no further payments are required, yet the coverage remains in force for the lifetime of the insured. This structure allows clients to pay their premiums in a shorter timeline, which can be appealing for individuals who prefer to have their policy fully paid up before retirement or at a certain age. Although the policy will continue to provide coverage long after the premiums have ceased, the limited payment period distinguishes it from other types of permanent life insurance, where premiums may be required throughout the policyholder's lifetime. In contrast, other features associated with different types of life policies, such as graded death benefits, no cash value, and payments until age 100, are not characteristics of Limited-Pay Life policies. This understanding underscores the unique benefits and design of Limited-Pay Life insurance, making it a suitable choice for various financial planning strategies.