Limited Pay Life Insurance
A limited pay life policy allows you to pay off your life insurance in a set number of years. In the short term, this means your premiums will be more expensive than average. But a limited pay life policy allows you to avoid paying insurance premiums later in life. Limited pay life insurance policies also have the potential to accrue a cash value more quickly than a standard whole life insurance plan.
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Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
UPDATED: Jun 19, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
UPDATED: Jun 19, 2024
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- A limited pay life insurance policy allows you to pay your insurance premiums in full within a certain time frame
- Limited pay policies work well for people who prefer not to pay premiums as they mature
- Most companies allow you to select anywhere from a 10- to 25-year term in which to pay your insurance premiums
There are many different options in regard to life insurance policies. No matter your budget, there is likely a life insurance policy that could work for you and benefit your loved ones.
One type of permanent life insurance policy that isn’t as common as others is a limited pay life insurance policy.
With a limited pay life policy, you pay your premiums in full within a set number of years. Once the years have passed, you will no longer owe your insurance company premium money, but you will continue to have your insurance benefits until you pass away.
Continue reading to learn more about limited pay life insurance and whether or not this type of policy would be appropriate for you. Be sure to use our free quote tool above to compare rates from top life insurance companies in your area today.
What is a limited pay life insurance policy?
With a limited pay life insurance policy, you can pay off the entirety of your life insurance premiums within a set number of years. Once your premiums are paid in full, you no longer have to make payments on the plan; however, the plan is still active.
The major benefit of a limited pay life insurance policy is that you don’t have to worry about making life insurance payments as you get older. This could mean that you cease paying around retirement age, depending on the amount that you pay in monthly premiums.
The payment plan for a limited pay life insurance policy is similar to a term insurance policy in that you can select a term — anywhere from 10 to 25 years — in order to pay your premiums in full.
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How much is limited pay life insurance?
It’s impossible to know how much you would pay in life insurance rates with a limited pay policy until you decide which type of policy you want, whether you want annuities or riders, and the amount of time you want to take to pay off the policy.
The shorter the time frame you choose to pay off your policy, the more expensive your monthly rates will be. However, the earlier you pay off your policy, the faster you’ll see growth in your policy’s cash value.
Limited pay life insurance policies are a type of whole life insurance. The table below reveals average monthly whole life insurance rates based on the amount of the policy, a person’s age, and gender.
Whole Life Insurance Monthly Rates by Age, Gender, & Coverage Amount
| Age & Gender | $100,000 Policy | $250,000 Policy | $500,000 Policy | $1,000,000 Policy |
|---|---|---|---|---|
| 25-Year-Old Male | $94 | $85 | $225 | $203 |
| 25-Year-Old Female | $108 | $97 | $260 | $234 |
| 35-Year-Old Male | $128 | $113 | $311 | $273 |
| 35-Year-Old Female | $154 | $132 | $376 | $321 |
| 45-Year-Old Male | $191 | $156 | $468 | $381 |
| 45-Year-Old Female | $235 | $192 | $578 | $470 |
| 55-Year-Old Male | $295 | $243 | $728 | $599 |
| 55-Year-Old Female | $399 | $312 | $989 | $770 |
| 65-Year-Old Male | $528 | $422 | $1,311 | $1,045 |
| 65-Year-Old Female | $712 | $568 | $1,525 | $1,215 |
As you can see, the older you are — and the larger the policy you purchase — the more expensive your premiums will be.
What are the limited pay life insurance pros and cons?
The most immediate benefit of a limited pay life insurance policy is the ability to achieve a paid in full status.
Limited pay life insurance policies also have the potential to accrue a larger cash value and more immediate life insurance dividends than a standard whole life insurance policy. If you add on some sort of straight life policy annuity, you could see a good amount of value associated with your policy.
If you want to use your life insurance as a post-retirement income source, a limited pay policy may work better for you than a whole life policy or a level term life insurance option.
The biggest downfall of the limited pay life insurance policy is the expensive premiums. To choose a limited pay policy, you will need to pay a substantial amount of money up front for a reasonable cash value and death benefit.
Another aspect to consider is the fact that some riders and annuities available for standard whole life policies are not an option with a limited pay policy.
Lastly, where other types of life insurance policies have the potential to offer a bit of flexibility when it comes to premium payments, limited pay policies do not offer much pliability.
Should I purchase a limited pay life insurance policy?
If you know the amount of policy you desire and the death benefit you’re looking for, and if you can afford the substantial premium payments, a limited pay life insurance policy may be a good idea for you.
Before making any decisions regarding the type of policy you need, you should do some research to determine how much you would pay for alternative types of life insurance.
You can obtain quotes from multiple companies and compare them to discover which companies offer more affordable rates for whole life insurance options.
Be sure to use our free quote tool below to find and compare limited pay life insurance quotes with other types of life insurance to determine which rates might work best for you.
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Case Studies: Exploring the Benefits of Limited Pay Life Insurance
Case Study 1: John’s Limited Pay Life Insurance
John, a 45-year-old individual, wanted to secure his family’s financial future while minimizing long-term expenses. He opted for a limited pay life insurance policy, paying premiums for 15 years. This allowed him to avoid paying insurance premiums during his retirement years.
Despite the higher initial premiums, John’s policy accrued a significant cash value, providing him with financial flexibility. The limited pay life insurance policy proved to be a suitable choice for John’s specific needs.
Case Study 2: Sarah’s Financial Security
Sarah, a 35-year-old professional, was looking for a life insurance policy that would ensure her family’s financial security. She chose a limited pay life insurance policy with a payment term of 20 years.
Although the monthly premiums were higher compared to other options, Sarah valued the fact that she would no longer have to make premium payments later in life. The policy’s cash value grew at a faster rate than a standard whole life insurance plan, providing Sarah with peace of mind and financial stability.
Case Study 3: Mark’s Post-Retirement Income
Mark, a 55-year-old nearing retirement, wanted to secure a reliable post-retirement income source. After careful consideration, he decided to purchase a limited pay life insurance policy. By paying substantial upfront premiums for a reasonable cash value and death benefit, Mark ensured financial stability for his later years.
The limited pay policy’s structure aligned with Mark’s goal of using life insurance as a source of income after retirement.
Frequently Asked Questions
What is limited pay life insurance?
Limited pay life insurance is a type of life insurance policy where the policyholder pays premiums for a specified period, typically a shorter term such as 10, 15, or 20 years. After the premium payment period is complete, the policy remains in force for the insured’s entire lifetime, providing a death benefit to the beneficiaries upon the insured’s passing.
How does limited pay life insurance differ from regular whole life insurance?
Limited pay life insurance differs from regular whole life insurance in terms of premium payment duration. With limited pay life insurance, the premiums are paid for a specific period, while regular whole life insurance requires premiums to be paid throughout the insured’s lifetime. Once the premium payment period ends for limited pay life insurance, the policy is fully paid up, and no further premium payments are required.
What are the advantages of limited pay life insurance?
Limited pay life insurance offers several advantages, including:
- Premium payment term: It allows you to pay off your life insurance policy within a specific period, ensuring you have coverage without lifetime premium obligations.
- Lifetime coverage: Once the premium payment period is complete, the policy remains in force for the rest of your life, providing peace of mind to your beneficiaries.
- Cash value growth: Limited pay life insurance policies accumulate cash value over time, which can be accessed through policy loans or withdrawals if needed.
- Estate planning: The death benefit from a limited pay life insurance policy can be used for estate planning purposes, such as providing funds to pay estate taxes or leaving a legacy for your loved ones.
Are limited pay life insurance premiums higher than regular whole life insurance?
Limited pay life insurance premiums are generally higher than regular whole life insurance premiums. This is because the premiums are condensed into a shorter payment period. However, when considering the total cost over the policy’s duration, limited pay life insurance may be more cost-effective than whole life insurance due to the shorter premium payment term.
Can I customize the premium payment period for limited pay life insurance?
Yes, you can often customize the premium payment period for limited pay life insurance within the options provided by the insurance company. Common choices include 10, 15, 20, or 30 years. The specific options available may vary depending on the insurer and the policy you choose.
Your life insurance quotes are always free.
Secured with SHA-256 Encryption
Brad Larson
Licensed Insurance Agent
Brad Larson has been in the insurance industry for over 16 years. He specializes in helping clients navigate the claims process, with a particular emphasis on coverage analysis. He received his bachelor’s degree from the University of Utah in Political Science. He also holds an Associate in Claims (AIC) and Associate in General Insurance (AINS) designations, as well as a Utah Property and Casual...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.
