Which type of policy is the best example of a limited pay life insurance policy?

A limited pay life insurance policy is characterized by premiums that are paid for a specified period rather than for the entire life of the insured. This means that the policyholder is insured for their lifetime but only has to make premium payments for a limited time.

In this case, a whole life policy where premiums are paid up after 20 years is a prime example of a limited pay life insurance policy because it guarantees that the coverage remains in effect for the lifetime of the insured, while allowing the policyholder to stop paying premiums after the 20-year term. This structure is beneficial for individuals who want the security of lifetime coverage without the long-term financial commitment of paying premiums indefinitely.

Other options do not fit the definition of a limited pay policy. A term policy with annual premiums requires payments periodically for a set term, but the coverage doesn't last for the insured's lifetime without further payments. Universal life insurance and variable life insurance both allow for flexible premiums and do not have a specified period for stopping payments, which deviates from the characteristics of a limited pay life policy. Thus, the whole life policy with premiums paid up after 20 years aligns perfectly with the concept of limited pay life insurance.