What Is a 20-Pay Whole Life Insurance Policy?
A 20-payment whole life insurance policy is a type of limited payment whole life insurance where premiums are paid over a shorter period of time, according to the New York State Department of Financial Services. Under this plan, a person pays premiums for 20 years and is insured for life.
A 20-payment whole life insurance policy differs from traditional whole life insurance because the premium payments do not continue as long as the insured person is alive. Instead, the person makes payments over a period of only 20 years. Because there are fewer payments, the premiums tend to be of higher amounts for limited whole life insurance policies.
The New York State Department of Financial Services list the advantages and disadvantages of taking out whole life insurance policies. The policies are predictable, with mostly fixed rates through the duration of the payments. Cash values are often available if the policy is surrendered or the insured person stops making payments. Beneficiaries also receive death benefits independent of when the insured dies. The cons of whole life insurance policies include higher premium payments, which can strain a person or family's finances, a more complex process than traditional term life insurance policies, and a higher cost if the insurance coverage lapses early.