Navigating the process of shopping for life insurance can be confusing. There are many different policy types available, and it’s important to choose the right policy for your budget and your needs. One option is a limited pay life policy, which gives you life insurance coverage for life.
So, what is a limited pay life insurance policy, exactly? This type of life insurance is structured so you pay your entire premium during a specific period, like 15 or 20 years. Once you’ve finished paying, you own the policy and it will be in place for the rest of your life. As a result, this type of policy can be ideal when you have a thriving career early on in life. After you’ve paid for the policy, you can save money in your latter years, which is especially helpful once you’re retired.
Limited pay life policies also often have the ability to accumulate cash value. You can potentially access that cash during your lifetime, and the cash value is tax-deferred. The death benefits from a limited pay life policy are usually tax-free for your beneficiaries.
When you purchase limited payment life insurance, you can usually choose a period ranging from seven to 20 years. Your premiums will be divided across that period, so you ultimately pay for the policy in full. Since you’ll be paying the policy off faster than you would a traditional whole life insurance policy, your premiums will be higher. You can also pay the premiums on a monthly, quarterly, semi-annual, or annual basis.
Several factors will impact the cost of your limited pay life insurance policy. Policies with a higher amount of coverage will cost more to purchase. If you choose a shorter payment term, such as seven years, your premiums will be substantially higher than they will if you choose a longer term.
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Like any life insurance policy, there are pros and cons to a limited pay policy. You’ll need to carefully consider these pros and cons to decide if a limited pay policy is right for you.
You can save on limited pay life insurance by shopping around and comparing quotes. You can get free life insurance quotes online today to start exploring your options.
Paige Cerulli Paige Cerulli is a freelance content writer and journalist who specializes in personal finance topics. She graduated from Westfield State University and brings more than a decade of professional writing experience to the ConsumerCoverage team. Paige’s work has appeared in outlets including USA Today, Business Insider, and more.
