Which premium payment method allows a policyholder to pay premiums for a shorter duration compared to a standard whole life policy?

The correct answer is a limited-pay policy, which is designed specifically to allow policyholders to pay premiums over a shorter duration compared to a standard whole life policy. In a typical whole life policy, premiums are paid for the entire life of the insured, which can be for several decades.

With a limited-pay policy, the payment period can be structured to be significantly shorter—such as 10, 15, or 20 years—after which the policyholder won’t have to make any further premium payments. This can make limited-pay policies attractive to individuals who want lifetime coverage without the burden of premium payments throughout their entire lifetime.

The single premium policy is another method of payment, but it requires a one-time, upfront payment for the entire value of the policy, which does not align with the concept of paying premiums for a shorter duration over time. Universal life policies have flexible premium payments, but they generally lack the structure of a limited-pay policy, which specifically aims for a finite payment period. The indeterminate premium policy does not focus on the payment duration in the same way either and is more about varying premiums based on current interest rates and other factors.

Understanding these distinctions helps clarify why a limited-pay policy is the correct choice when it comes to