Which of the following life insurance policies provides a 25-year-old with the most rapid growth...

B. 20-Pay Life produces the most rapid cash-value accumulation among the choices. A 20-Pay Life contract is a limited-payment whole life policy . The insured pays the premiums over only twenty years, but the permanent insurance remains in force for life once the required premiums have been completed. Because the premium-payment period is compressed, a greater amount must generally be contributed during the early years than under ordinary straight whole life. This causes the policy's reserve and associated guaranteed cash value to develop more rapidly.

A Life Paid-Up at Age 65 policy is also limited-pay whole life, but for a person purchasing it at age twenty-five, premiums would ordinarily be spread over approximately forty years. Consequently, its cash-value accumulation is slower than a comparable 20-pay contract. Straight Life spreads premiums across the insured's lifetime and therefore develops value less rapidly than the shorter limited-payment plan.

Renewable term is clearly incorrect because term insurance ordinarily provides pure death protection and does not accumulate cash value . Hawaiʻi's Insurance Division similarly distinguishes whole life as coverage that may contain a cash-value savings element, whereas term coverage is temporary protection.

Reference topics: Traditional Whole Life Products — Ordinary Whole Life; Limited-Pay Life; Term Life.

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