Benefits of Limited-Pay Life Insurance

Posted in Life Insurance

January 12th, 2009

Another type of permanent insurance, limited-pay life insurance is a form of whole life insurance in which your beneficiaries are financially protected throughout your entire life from the date that the policy is enacted. However, rather than continuing to pay premiums up to the day you die, you will be able to stop making payments on the policy after a certain limited period of time, while the policy remains in effect for the rest of your life.

Limited pay periods vary: common limited pay periods could be 10-year, 20-year, or paid up to age 65. Generally ten years is considered the minimum limited pay period, and the outside limit would be paid-up by 65.

The benefit from a limited payment life insurance policy can also be paid out in a variety of ways. You may choose to pay out the proceeds from the policy as a life income. This means that the life insurance company will pay out a specific income to your beneficiary for as long as he or she lives. This may sound as though your beneficiary has won the lotto, because with such an unspecified term of payment, your beneficiary could stand to collect far more than the face amount of the policy if they live for a long time after your death. On the other hand, if the beneficiary dies a month after you do, no more income is paid, because their life was the term of the payment. Other choices are life income with a certain period certain (such as 5, 10 or 20 years), a fixed period income, a fixed amount income, a lump sum payment, or an interest-only option. You should consult with your life insurance agent to review your options and determine the best insurance plan for your needs.