PSI Life Exam Practice Test

Which type of insurance policy is characterized by premiums that are fully paid-up within a stated period?

1. Limited payment life insurance

2. Whole life insurance

3. Universal life insurance

4. Term life insurance

The correct answer is: Limited payment life insurance

Limited payment life insurance is the type of policy that is characterized by premiums that are fully paid-up within a specified period. This means that the policyholder makes a series of premium payments for a set term, and after this period, no further premiums are required. However, the policy remains in force, and the insured is provided with lifetime coverage. This structure allows individuals to secure insurance coverage without the burden of paying premiums for their entire lifetime. In contrast, whole life insurance typically requires premium payments throughout the policyholder's life, unless a limited payment option is specifically chosen. Universal life insurance offers flexibility in premium payments and death benefits but does not guarantee that premiums will be paid up in a specified period without additional conditions. Term life insurance generally provides coverage for a specific term and does not accumulate cash value or provide a paid-up status, as it is primarily designed to provide financial protection for a limited time.