28. All of the following about continuous premium whole life and limited payment whole life insurance policies are true EXCEPT
Answer: B
Both types of policies require premiums to be paid over the lifetime of the insured
While continuous premium whole life insurance requires premiums to be paid throughout the insured's lifetime, limited payment whole life insurance only requires premiums to be paid for a specified period, after which the coverage continues without further payments. Thus, the assertion that both require lifetime premium payments is incorrect.
A) both types of policies are forms of whole life insurance
This statement is correct as both continuous premium whole life and limited payment whole life insurance are indeed types of whole life insurance. They share the characteristic of providing lifelong coverage and a cash value component.
B) both types of policies require premiums to be paid over the lifetime of the insured
This statement is incorrect because, in limited payment whole life insurance, premiums are only paid for a limited time, after which the policy remains in force without any further premium payments. This distinguishes it from continuous premium whole life insurance, which requires ongoing payments.
C) both types of policies provide death protection for the same period of time
This statement is true as both continuous premium and limited payment whole life insurance provide death protection for the entire life of the insured, hence they share this characteristic.
D) both types of policies may be participating or non-participating
This statement is accurate because both types of policies can be structured as participating, where policyholders may receive dividends, or non-participating, where no dividends are paid. This reflects the flexibility within each policy type.
Conclusion
The statement regarding lifetime premium payments is the only incorrect assertion since limited payment whole life insurance does not require premiums to be paid for the insured's entire life. All other options accurately describe the characteristics of both types of policies, reinforcing that option B is the exception among the statements provided.