What is Limited Payment Life Insurance?

Pros and cons of limited payment life insurance

Limited payment life insurance offers several benefits and drawbacks, making this type of coverage suitable for certain policyholders:¹

Pro: Limited payments

Limited payment life insurance premiums only last as long as the policy term. When the term ends, you no longer need to make payments to maintain coverage. This can help those with higher incomes now but expect lower incomes in the future, such as individuals who may want to maintain coverage on a fixed retirement income.

Pro: Lifelong coverage

Limited payment life insurance coverage lasts for life, despite the limited premium payments. It can offer added peace of mind that your beneficiaries are better protected no matter what, even when you stop paying premiums when the payment term ends.

Pro: Cash value growth

The higher premium payments of limited payment life insurance may lead to larger cash value contributions. As a result, you earn interest on a larger amount, which can mean faster cash value growth and compounding. If you plan on using your life insurance as an additional wealth-building vehicle and want to eventually cease payments, limited payment life insurance could help.

Con: High premiums

Traditional whole life insurance is one of the most expensive policy types in terms of premiums. Limited payment life insurance condenses these premiums into a fixed timeframe, making them even higher. Such premiums may strain potential policyholders financially, making it hard for them to afford their lifelong coverage.

Con: Opportunity cost

Paying higher premiums on limited life insurance has an opportunity cost. The cash value may grow tax-deferred at a guaranteed rate, but the rate is low. Investing the extra funds in securities or assets could offer higher potential returns. Plus, investing in certain retirement accounts may offer the same tax advantages as cash value life insurance.

Alternative payment options for whole life insurance

Limited payment life insurance isn’t for everyone. Here are some alternative whole life insurance options that can fit different financial situations:

• Traditional policy with lifelong premiums: Traditional whole life insurance requires lifelong payments, but it will typically come with lower premiums than limited payment life insurance.


• Single, lump-sum payment: Insurers may let you pay for all your limited payment life insurance up front in a lump-sum payment. This option may work well if you have the cash available, such as if you recently received a windfall.


• Dividend-paying whole life insurance: Some whole life policies pay dividends when the insurer experiences good financial performance. You can have the insurer put your dividends toward your premiums, reducing the amount you pay out-of-pocket for coverage.


• Graded premium life insurance: This type of policy offers lower premiums early in the policy term. The premiums then increase with time, designed to mimic the policyholder’s income growth.³

Get a whole life insurance quote

Limited payment life insurance helps you to gain lifelong coverage and cash value for a fixed period of payments. However, payments are much higher, so these policies don’t work for all financial situations. A limited payment life insurance policy may be best for those with a high enough income to afford the premiums, especially if they expect their income to decrease later.

If limited payment life insurance isn’t for you, Aflac has traditional whole life insurance and many other types of policies to explore. Speak with an agent today to discover our life insurance options and get a quote.