New Jersey Life Insurance Exam Practice Question
What BEST describes a limited pay life insurance policy?
Correct Answer: B
Rationale: A limited pay life insurance policy is characterized by the requirement to pay premiums for a specified period, after which the policy is considered fully paid and remains in force for the insured's lifetime. Option B accurately describes this feature, as it specifies a whole life policy with premiums paid up after 20 years.
Option A incorrectly describes a term life insurance policy, which provides coverage for a limited time without any cash value. Option C also mischaracterizes term insurance by suggesting a decreasing value, which is not a feature of limited pay policies. Option D confuses the concept, as it refers to a whole life policy with a return of premium, which is not synonymous with limited pay.
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