New York Child Abuse Identification and Reporting Practice Exam

What typically happens to policy benefits after a limited pay whole life policy is fully paid?

1. They are forfeited

2. They decrease sharply

3. They continue as normal

4. They are transferred to a surrender value

The correct answer is: They continue as normal

In a limited pay whole life policy, after the premium payments are completed, the policy benefits generally continue as normal. This means that the insurance coverage remains in effect for the lifetime of the insured, and the death benefit will still be paid to the beneficiaries upon the death of the insured. Furthermore, the policy may also accumulate cash value over time, which can be accessed or borrowed against, but the key aspect is that the fundamental benefits, including the death benefit, do not diminish or terminate once premiums are fully paid. This feature distinguishes limited pay whole life policies from other types of life insurance, where coverage could cease after a certain point or where benefits might decrease. Therefore, once the premium obligation is satisfied, the insured can enjoy the policy's benefits without further payments.