Oklahoma Life Producer Practice Exam

What is the primary distinction between a limited pay policy and a limited benefits policy?

1. Limited pay focuses on coverage duration

2. Limited pay describes the benefits covered

3. Limited pay pertains to premium payments duration

4. Limited benefits are related to premium amounts

The correct answer is: Limited pay pertains to premium payments duration

The primary distinction between a limited pay policy and a limited benefits policy lies in the duration of premium payments. A limited pay policy allows the policyholder to pay premiums for a specified, shorter duration, while still maintaining coverage for life or until a specified age. This means that the policyholder can own a permanent life insurance policy without having to make premium payments throughout their entire life. In contrast, a limited benefits policy typically refers to the scope of coverage, where there may be restrictions on the amount or types of benefits that can be claimed. This does not change the payment structure but rather defines what is covered under the policy. Thus, saying that limited pay pertains to the duration of premium payments correctly captures the unique characteristic of this type of policy.