CARD Q029
A 20-pay whole life policy has had all 20 required annual premiums paid. What normally happens next?
- Premiums continue at a reduced rate for life
- Coverage continues under the paid-up policy
- The death benefit is reduced to the accumulated cash value
- Coverage continues as term insurance for another 20 years
Coverage continues under the paid-up policy
Limited-pay describes the premium-paying period, not a 20-year limit on the insured’s life coverage.
Why each choice is right or wrong
A. Premiums continue at a reduced rate for life
Incorrect. A fully paid 20-pay policy does not ordinarily require reduced premiums for life.
B. Coverage continues under the paid-up policy
Correct. Limited-pay describes the premium-paying period, not a 20-year limit on the insured’s life coverage.
C. The death benefit is reduced to the accumulated cash value
Incorrect. Cash value and death benefit are different; completion of premiums does not reduce the benefit to cash value.
D. Coverage continues as term insurance for another 20 years
Incorrect. The policy remains whole life rather than automatically becoming another 20-year term contract.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.