Exploring Limited-Pay Life Insurance: Sample Rates and Key Insights

Clifford PendellWritten by Clifford Pendell
Louis LopesReviewed by Louis Lopes, CLU ChFC
If you’re comparing whole life insurance policies, you’ve probably heard of limited-pay life insurance.

These policies provide the same benefits as other forms of permanent life insurance while allowing the policyholder to determine the duration of their premium payments. They can also build a cash value to supplement your income during retirement.

This insider’s guide explains everything you need to know about limited-pay life insurance and the benefits it can offer. We’ve also provided some sample rates by age to help you estimate the cost of your coverage.

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What is Limited-Pay Life Insurance?

Limited-pay life insurance is a form of permanent life insurance that collects premiums for a set period, typically for 7, 8, 10, 15, or 20 years. Once the limited-pay period has ended, the policy will remain in effect for the remainder of the insured’s lifetime.

There are two types of limited-pay life insurance, cash accumulating and non-cash accumulating. Cash accumulating policies are more expensive because they require additional funding to build a cash value. With a non-cash accumulating policy, you only pay for the cost of your coverage.

Some limited-pay policies also offer living benefits if you become terminally ill or require assisted living. These policies are often chosen by individuals that want to avoid paying life insurance premiums later in life when they are retired and living on a fixed income.

Types of Limited-Pay Life Insurance

Traditional limited-pay whole life insurance accumulates a tax-deferred cash value overtime. With most providers, up to 90% of these funds can be borrowed by the policyholder, but taking a loan is not without risk. If the interest rate on your loan exceeds the interest being credited to your policy, there's a risk of depleting your cash value.

That's why its crucial to work with an experienced agent and actively manage your policy's cash value. Alternatively, you can opt for a limited-pay guaranteed universal (GUL) life policy, and avoid the cash value. These policies offer comparable limited-pay periods and they don't require additional funds for investing.

Cash Accumulating Limited-PayNon-Cash Accumulating Limited-Pay
Guaranteed PremiumsGuaranteed Premiums
Guaranteed Death BenefitGuaranteed Death Benefit
Includes an Investment ComponentNo Investment Component
Builds Cash ValueNo Cash Value

The most common limited-pay life insurance policies are 10-pay and 20-pay. With a 10-pay policy, the policyholder is responsible for making on-time premium payments for 10 years. Once the last payment is made, the policy will remain active for the rest of the policyholder’s life.

With a 20-pay policy, the concept is the same, but because the premiums are paid over 20 years, they will be less expensive than a policy with a shorter limited-pay period such as 7, 10, or 15 years. This is because the insurance provider has more time to collect their premiums.

You can compare the cost of 10-pay and 20-pay life insurance policies using the free quote form below. If you would like to compare rates for a 7, 8, or 15-year limited-pay policy, please call us at 855-247-9555 to speak with a licensed agent.

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How Does Limited-Pay Life Insurance Work?

With limited-pay life insurance, the policyholder is only required to make payments for the limited-pay period. As an example, with a 10-pay policy, the insured would need to make on-time payment for 10 years. After this, the life insurance will remain inforce for the rest of the policyholder’s life.

Cash accumlating policies will have higher premiums than non-cash accumulating policies, and policies with shorter pay periods collect higher premiums. This is because the entire policy needs to be paid off during the limited-pay period. In the tables below, we’ve compared the cost of 10 and 20-pay policies to illustrate the difference.

Sample Rates for a Cash Accumulating Limited-Pay Policy - $500k Death Benefit

Current Age10-Pay (Female)10-Pay (Male)20-Pay (Female)20-Pay (Male)
35$2,412.08$2,572.16$986.15$1,089.24
40$2,658.72$2,828.81$1,136.66$1,246.71
45$2,928.86$3,105.90$1,306.74$1,424.63
50$3,245.10$3,422.15$1,516.41$1,641.69
55$3,601.37$3,798.86$1,771.32$1,920.09
60$4,026.80$4,256.91$2,098.88$2,288.54
65$4,534.88$4,721.93$2,534.75$2,804.45
*Displayed monthly rates are accurate as of 2/07/2024 and are provided for illustrative purposes only.

Sample Rates for a Non-Cash Accumulating Limited-Pay Policy - $500k Death Benefit

Current Age10-Pay (Female)10-Pay (Male)20-Pay (Female)20-Pay (Male)
35$510.00$592.00$293.66$333.85
40$620.00$713.00$348.25$398.76
45$760.00$881.00$409.68$471.52
50$918.28$1,081.00$528.70$581.67
55$1,121.50$1,284.11$633.46$710.03
60$1,418.64$1,639.65$791.55$903.37
65$1,758.26$2,031.84$993.51$1,156.75

*Displayed monthly rates are accurate as of 2/07/2024 and are provided for illustrative purposes only.

Cash accumulating limited-pay policies tend to be considerably more expensive, especially for individuals under the age of 40. However, the trade-off is the potential cash they can accumulate overtime.

For instance, consider a 35-year old female in excellent health, with a $500k, 20-policy:

After 20 years, she could have a cash value of $319,027 and a net death benefit of $730,925. The cost of this coverage would be $236,676 over the course of 20 years, with no additional premiums needed to keep the policy active. After 30 years, her policy could grow to have a cash value of $542,138 and a net death benefit of $970,374. 

With a non cash accumulating GUL, the cost of a $500k policy would be $70,478 paid over 20 years.

Here's another example, a 50-year old male in good health, with a $500k, 10-pay policy:

After 10 years, he could have a cash value of $448,761 and a net death benefit of $646,304. The cost of the policy would be $455,863 over the 10 year period, with no additional premiums required to keep the policy inforce. After 20 years, his policy could grow to have a cash value of $738,329 with a net death benefit of $948,144. 

With a non cash accumulating GUL, the cost of a 500k policy would be $154,093 paid over 10 years. 

To review your options for limited-pay life insurance, call us toll-free at 855-247-9555, or enter your information in the form below. We represent more than 60 highly rated life insurance providers and our comparative shopping services are completely free.

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How Long Does Coverage Last on A Limited Pay Life Insurance Policy?

Limited-pay life insurance is a form of whole life insurance that is designed to provide permanent life insurance to the policyholder. Like other forms of whole life, limited-pay life insurance offers level premiums for the duration of the policy’s limited-pay period and a guaranteed death benefit.

However, it is vital to note that borrowing money from your policy’s cash value could have consequences. Like other forms of whole life insurance, if the policyholder depletes their policy’s cash value, and does not repay the loan, their policy could become underfunded and lapse.

What are the Advantages and Disadvantages of Limited Pay Life Insurance?

Limited-pay life insurance offers appealing benefits, such as guaranteed lifetime coverage and fixed rates throughout the policy’s pay period. Cash accumulating policies also build a cash value that can be used to supplement your income, and certain insurers even pay dividends when profitable.

The downside to limited-pay life insurance is that it is more expensive than many other types of permanent life insurance. This higher cost is due to a fixed premium collection period, in contrast to other permanent life insurance policies that collect premiums over the insured’s entire lifetime.

Cash accumulating limited-pay policies have opportunity costs because the policyholder is losing out on other investment opportunities like bonds, mutual funds, and real estate. These policies also run the risk of becoming a modified endowment contract (MEC) if they become overfunded.

A term life insurance rider can be added to the policy if this occurs, further illustrating the need to work with a experienced agent. The following table illustrates the pros and cons of purchasing a cash accumulating limited-pay life insurance policy. 

Pros and Cons of Cash Accumulating Limited-Pay Life Insurance

ProsCons
Guaranteed Lifetime CoverageMore Expensive than other Permanent Policies
Fixed PremiumsOpportunity Cost
Accumulates a Cash ValueRisk of Policy Becoming a Modified Endowment Contract
             Limitied Premium Collection Period              
Potential to Earn Dividends
Living Benefits
Tax-Deferred Growth

Which Companies are Best for Limited Pay Life Insurance?

If you are buying a cash accumulating policy...

Mutual companies are considered an excellent choice for limited-pay cash accumulating life insurance due to their consistant track record of paying dividends to policyholders. Only a handful of mutual companies offer limited-pay whole life insurance, these include; Northwestern Mutual, MassMutual, Penn Mutual, Guardian, and New York Life.

If you are buying a non-cash accumulating policy...

Life insurance providers that specialize with guaranteed universal life (GUL) insurance are your best option. AIG, Pacific Life, Protective, and Nationwide are highly rated providers that offer competive rates for GUL insurance. Penn Mutual also offers non-cash accumulating limited-pay policies.

Pacific Life offers 5, 10, 15, and 20-pay options while MassMutual recently announced the launch of their 8-pay policy in February, 2024. Working with an experienced agent that represents more than one mutual life insurance provider will help you navigate your options and select a policy that best suits your needs.

It’s also vital to note that every life insurance provider sets their own underwriting guidelines and some companies are more lenient with health issues than others. Our agents are experts at matching their clients with the best policy available and we represent more than 60 providers.

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Guardian logo AM Best: A++ From: 0
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Mass Mutual logo AM Best: A++ From: 0
To: 75
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Nationwide logo AM Best: A+ From: 0
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Penn Mutual logo AM Best: A+ From: 0
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Protective logo AM Best: A+ From: 18
To: 85
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$50,000,000   

To learn more about your options for limited-pay life insurance, call us directly at 855-247-9555 or enter your information in the form below to instantly compare your options. Our consultative services are completely free and there is no cost to apply for life insurance.

Frequently Asked Questions

How Long Does Coverage Remain on A Limited Pay Policy?

Limited pay life insurance provides permanent life insurance coverage for your entire life. Once you’ve paid your last premium, no further payments are due, and your policy will remain active until you pass away.

What is the Difference Between Ordinary Life Insurance and Limited Pay Life Insurance?

With ordinary life insurance, the policyholder is responsible for making premiums during the entire duration of their policy, or until it matures at age 100 or later. With limited pay life insurance, the insured pays premiums for a fixed number or years, usually 7, 8, 10, 15, or 20.

What is the Purpose of a Limited-Pay Life Policy?

A limited-pay life insurance policy is ideal for individuals seeking permanent life insurance coverage without the commitment of lifelong premium payments. These policies allow the policyholder to choose a limited-pay period that aligns with their financial objectives, such as retirement.

What is the Main Difference Between Whole Life Insurance and Limited-Pay Life Insurance?

The main difference between whole life and limited-pay life insurance is the amount of time that the policyholder is responsible for paying premiums. With whole life, most policies collect premiums until the age of 100. With a limited-pay policy, the policyholder is only responsible for paying premiums during their policy’s limited-pay period of 7 to 20 years.

Does Limited-Pay Life Insurance have Cash Value?

Like other forms of whole life insurance, traditional limited-pay life insurance can build a cash value overtime. This money can be accessed by the policyholder while they are still living, and there are no stipulations on how the money must be spent.

How We Can Help

JRC is an independent life insurance agency representing 63 top-rated life insurance providers. Having access to a wide variety of providers allows our experts to anonymously shop the market on your behalf, matching you with the best option available.

Our agents offer at least a decade of experience and our consultative shopping services are completely free. We have helped thousands of families and businesses with their life insurance needs and we can help you too.

Call us today at 855-247-9555 to connect with one of our licensed agents, or you can request a free limited-pay life insurance quote by selecting your state from the map below. In less than a minute you will be able to view your available options and compare rates.

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Written by:

Clifford Pendell

Clifford Pendell

Managing Partner and Co-founder

Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.

Expert reviewed by:

Louis Lopes

Louis Lopes, CLU ChFC

Chartered Life Underwriter, Licensed Life and Health Agent

Louis has been in the insurance business for over 30 years. He specializes in “high risk” cases as well as more complex coverages for long term care, disability, and estate planning.

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