Final answer:
Single premium whole life insurance is a type of limited payment life insurance plan that provides a significant tax advantage over other permanent plans due to the ability to pay a lump sum upfront and the tax-deferred growth of its cash value.
Step-by-step explanation:
The correct answer to which life insurance policy is a type of limited payment life insurance plan and offers a greater tax advantage than other permanent plans is D. Single premium whole life insurance. This type of policy allows the insured to pay a lump sum premium upfront, which then provides coverage for the insured's lifetime.
The single premium paid builds cash value quickly due to the large initial payment, and the growth is tax-deferred, providing a significant tax advantage.
Other types of policies such as A. Modified whole life, B. Graded premium whole life, and C. Variable universal life have different payment structures and benefits. Modified whole life insurance starts with lower premiums that increase over time, graded premium whole life gradually increases premiums, and variable universal life allows for investment of the cash value but also carries higher risk.
Cash-value life insurance policies, in general, have a death benefit and a cash value account which can be used by the insured during their lifetime. The tax advantages associated with these policies, especially the single premium whole life, make them a valuable component of an individual's overall financial strategy.