In addition to all the advantages attributable to life insurance in general, and whole life insurance in particular, limited pay policies have three distinct advantages:
Forecasting the total dollar outlay for limited pay policy coverage is easier than for ordinary level premium whole life insurance. Because premiums on ordinary life continue throughout the insured’s lifetime, a person who enjoys a longer than average life my pay more in total premiums for the ordinary level premium whole life policy than for a limited pay policy.
Limited pay policies build tax-favored cash values more quickly than ordinary life policies. Therefore, policy owners enjoy greater tax-deferred earnings in the policy. This faster growth makes policy cash values available more quickly and in larger amounts in a given year than with a whole life policy of a comparable face amount.
Once policyowners have paid all required premiums, their policies will remain in force for the remainder of their lives. Therefore, they face less risk that the policy may lapse for failure to pay premiums if they experience financial difficulties in the future.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM