LIMITED PAY WHOLE LIFE
Higher Premiums Early to Create a Paid-up Policy
What is Limited Pay Whole Life Insurance?
Limited Pay Whole Life Insurance is a contract designed to accept yearly required premiums that are higher than those of straight whole life so that the policy cash value will grow faster allowing less premium to be paid over the life of the contract.
Where straight whole life requires premiums to be paid every year until age 100, limited pay whole life insurance is designed to be fully funded much faster. Typical policy designs for limited pay whole life insurance are “10-Pay” or “Pay Until Age 65” at
which time the policy will no longer accept additional premiums while the guaranteed interest rate continues to increase the cash value to equal the death benefit at age 100.
Who Buys Limited Pay Whole Life Insurance?
People who buy limited pay whole life insurance want to leverage some death benefit protection with the primary goal of accumulating cash value in a tax-advantaged and protected environment. They typically have the assets available and transfer their equity from less efficient accounts to the cash value of the limited pay life insurance policy over time although some high earners will buy limited pay whole life with excess earnings.
Because a limited pay whole life insurance policy accepts more premium contributions than straight whole life insurance, the death benefit per dollar of premium is significantly less. Therefore, some individuals will couple a term life insurance policy with a limited pay life insurance policy to meet their short-term life insurance needs, long-term life insurance needs and cash accumulation goals.
Alternative to Limited Pay Whole Life Insurance:
Like all whole life insurance, limited pay life insurance requires the policyowner to pay premiums when due. For people who want to own whole life insurance and accelerate their cash value accumulation but are worried about the additional premium commitments when compared to straight whole life, Decision Tree Financial can help you design a policy that meets your needs.
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Understanding why one would purchase a limited pay whole life insurance, which requires significantly more than term life insurance, is difficult to understand without a comprehensive financial plan. Decision Tree Financials Wealth Performance and Protection System (WPPS) can help you understand the best strategies to accomplish all of your financial goals and find out if a limited pay whole life insurance contract is the right product for you to own.