Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance. Not only does he strive to provide you with the ...

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Written by Jeffrey Manola
Founder & Licensed Agent Jeffrey Manola

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 29, 2022

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It’s all about you. We want to help you make the right life insurance coverage choices.

Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance provider and cannot guarantee quotes from any single provider.

Our insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

Life insurance provides assurance for more than just final expenses. It can also provide the funds for emergencies, replace a spouse’s lost income, and even act as an inheritance.

If you’re beginning your search for the best life insurance coverage and browsing quotes, you’ll most likely be provided with a quote that reflects either the monthly, quarterly, semi-annual or annual cost of the coverage. This is what is known as the premium.

Unless otherwise requested, the majority of life insurance quotes are shown to reflect the cost of the life insurance each year for however long the life insurance contract will be purchased for. This is how nearly every life insurance quote is presented to a consumer that is requesting a quote.

For example, let’s say you were interested in a 30-year term life insurance policy and have requested a quote to see what the rate will be. Since term insurance has a fixed rate for the duration of the term contract your quote will reflect a fixed yearly price that is guaranteed to remain that price up until the end of the 30th policy year.

The same also goes with permanent life insurance, like universal life and even whole life insurance. Similar to a term insurance quote, a permanent life insurance quote will also have a fixed yearly premium that is also guaranteed to remain the same price throughout the entire lifetime of the contract.

So what if you don’t want to pay premiums each year? Are there other options?

Yes, there are and it’s referred to as a limited pay life insurance.

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What is Limited Pay Life Insurance?

A limited pay life insurance policy is really exactly how it sounds. It allows for premium payments that would normally be paid throughout the entire contract to be paid in a much shorter duration of time resulting in a paid-up life insurance policy.

A paid-up life insurance policy means that you have paid for the entire cost of life insurance coverage ahead of schedule and no more payments are required.

With all limited pay life insurance policies, premium payments will be much higher than if you were to pay the scheduled premium payments throughout the entire lifetime of the contract.

The reason for this is because the payments are condensed into a much smaller paying timeframe, rather than them being stretched out throughout the entire contract duration.

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Types of Limited Pay Life Insurance Options

Most limited pay life insurance options are associated with whole life insurance coverage. Although not as common as whole life insurance, both universal life and even term life insurance can be modified to have limited payments if requested.

Because limited payment options are more common in whole life insurance situations, we will discuss the several limited pay options that are available on a whole life insurance policy.

Single Premium

Single premium whole life insurance is paid for in one single lump sum payment.

Fixed Period Pay

There are 7, 10, 15, 20, and 30 pay policies within whole life insurance plans.

Premiums in a 7-pay policy are paid off in seven years. The policyholder enjoys life insurance for life and the policy is considered cash value after seven years.

As you can guess, 10-pay policies are paid off in 10 years. There is not much different to a 10-pay policy except the premiums are lower than a seven-year policy.

The 15 and 20-year pay policies are beneficial due to lower premiums. The time frame is still short which is why this is a popular choice for a child’s plan.

Premiums in a 30-pay life insurance plan are among the cheapest options. They also come with all the long-term benefits relative to cash values and interest.

Pay to age 65

Another option is the limited payment policy to age 65.

This involves payments until the age of 65 and is a popular choice for those who cannot afford to pay high premiums for shorter spans but do not want to pay for insurance during retirement.

Benefits of a Whole Life Insurance Policy

Because the limited pay option is more common in whole life insurance policies, we think it’s important to discuss some of the benefits that whole life insurance coverage can provide.

Fixed Premium: Whole life insurance policies come with a fixed premium. This means that once you are approved and the contract has been activated, you won’t have to ever worry about your premium payment ever-changing on you.

Guaranteed Death Benefit: A guaranteed death benefit assures that the beneficiary of the life insurance contract will receive 100% of life insurance death benefit proceeds should the insured pass away.

Guaranteed Cash Values: Whole life insurance policies offer guaranteed cash values that grow based on a minimum interest rate. The cash values will continue to grow year after year and can be used as income through policy loans.

Potential Dividends: In addition to guaranteed cash values, whole life insurance policies considered to be “participating” may have the potential to earn dividends. Dividends are additional payments paid by the insurance company to the policyholder.

Policy Add-Ons: Whole life insurance policies have several included as well as optional policy riders that can be added to the base coverage. Policy riders can enhance the life insurance coverage in both protection as well as cash value build-up.

Limited Payment Options: Whole life insurance offers several different limited payment options allowing for the entire life insurance coverage to be paid up in a short duration of time.

What are the Benefits of Limited Pay Life Insurance?

One of the biggest benefits of electing to purchase a limited pay life insurance policy is not having to worry about making premium payments for the duration of the entire life insurance contract.

For permanent plans such as a limited pay whole life insurance policy, it can be a relief knowing that your coverage will be paid up and you will not owe premium payments into your elderly years. This can be especially beneficial when a fixed budget is required later in life.

Another nice benefit to making larger limited payments is the potential tax-deferred cash build up it can earn. By making larger payments, the cash values can grow much quicker and significantly greater.

This is one of the many benefits of having a limited payment life policy. If times get hard, you can take cash in the form of policy loans from your life insurance policy.

Another benefit is premium back up.

Premium back up applies more so with universal life insurance policies, as it allows for more flexibility on skipping premium payments.

As long as there is enough cash build-up within the universal life insurance policy, you can skip premium payments as they can be deducted from the cash value keeping the policy from lapsing.

One last benefit, which is really a great one, pertains to children. A limited pay life insurance policy for a child can provide permanent protection on a child that will last an entire lifetime. In addition, there can be great cash build up waiting for them later in life when they could use it most.

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Potential Concerns about Purchasing Limited Pay Life Insurance

If you are considering a limited pay life insurance policy you can rest assured that there are very few negative drawbacks. However, a concern worth noting is that you can expect premium payments to be much higher.

The reason for higher payments is because you’re paying for the entire life insurance coverage in a significantly shorter timeframe than if you were to pay over the entire life of the life insurance contract.

If you do decide to pay for your entire life insurance coverage in one shot which is know as a single pay, there could also be the potential of creating a MEC otherwise known as a modified endowment contract.

When MEC occurs on a life insurance policy it creates a taxable occurrence on the cash build up. On the bright side, most life insurance companies will provide you with an advance warning should there be a potential of a MEC occurring.

Ready to Get Your Limited Payment Whole Life Insurance?

Never worry about coverage ending or increasing premiums. Have the peace of mind in knowing that you and your loved ones are covered for your life and after.

Top Quote Life Insurance offers several different life insurance options as well as instant comparative insurance quotes to help you find the perfect provider and policy for your needs.

We also have informative resources to ensure you make the best decision. Contact us today to speak with a representative.

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