Limited pay life insurance is a type of permanent life insurance. With limited pay all of the premiums are paid over a specific period of time, usually 10, 20 or 30 years. Once this period is up them no additional premium is needed to keep the policy active. The policy will stay active until the death of the policy holder or until the policy holder reaches the age of endowment. The age of endowment varies by company but is typically 95+.
Permanent Life Insurance
Permanent life insurance a type of life insurance that stays active until the policy holder dies or the policy matures either at the age of endowment or at another predetermined time. The insurance company cannot cancel the policy for any reason, short of fraud, even if the policy holder becomes chronically ill shortly after the policy is purchased. the only time an insurance company can cancel a policy is within the first two years but the insurance company would have to show good reason to cancel, illness would not qualify as a good reason.
A permanent life insurance policy also builds cash value until it matues. This helps reduce the risk for the insurance company and can result in a reduction of the premiums further into the policy. Limited pay is one type of permanent life insurance.
With a limited pay policy you only have to pay the premiums up to a certain point but will continue to receive protection under the policy well beyond the payment period. This is an excellent life insurance option for long term coverage. Unlike term life insurance, limited pay will cover you beyond the payment period. With term life you are only covered as long as you pay the premium for the term period. Limited pay policies can be more expensive than term life but the benefits far outweigh the cost.