Final answer:
An individual who wants permanent life insurance coverage but wishes to pay premiums for only a decade would typically purchase a Limited pay life insurance policy. This policy provides life-long protection with a finite payment plan, making it suitable for those who want to ensure financial security without long-term premium commitments.
Option 'a' is the correct.
Step-by-step explanation:
If an individual seeks permanent life insurance protection and aims to fund the policy for only a decade, they would likely have purchased a Limited pay life insurance policy.
This type of policy is designed so that the premium payments are made for a certain period shorter than a lifetime, such as 10 years, but the coverage lasts for the insured's lifetime.
Unlike Whole life insurance, which typically requires premium payments throughout the life of the policy, or a Deferred annuity, which involves accumulating funds over time that will later provide income, Limited pay life policies allow for coverage without the need to continue payment until death. It is different from Renewable and convertible term insurance, which is temporary and must be renewed or converted to a permanent policy.
Many individuals seek ways to secure their financial future, especially during retirement. Products like life insurance and annuities are part of retirement planning strategies to ensure stable income in one’s older years.
Permanent life insurance with a limited payment plan can be a valuable tool for long-term estate planning and income protection, as it provides both a death benefit and the potential to accumulate cash value over time. Thus, the appeal of such a policy is the combination of life-long insurance protection and a short-term funding commitment.
It's important for policy buyers to be aware of the various insurance options available to them and the long-term implications of each, considering potential economic factors such as inflation, which could erode fixed income streams like pensions over time.
For individuals planning for their retirement, balancing the risks and potential returns of different savings and insurance products is crucial in ensuring sufficient income and financial stability in their golden years.