What typically happens when a limited-pay life policy matures?

When a limited-pay life policy matures, the policyholder is entitled to receive a lump sum payment, which usually includes the death benefit plus any accumulated cash value. This payment is made at the end of the specified premium payment period, which is the hallmark of a limited-pay life policy.

Limited-pay life insurance is designed so that the insured pays premiums for a limited number of years (for example, 10, 20, or 30 years) instead of throughout their entire life. Once those premiums are fully paid, the policy remains in force for the life of the insured, and upon maturity, the insured can either collect the death benefit in a lump sum if they are still alive or the beneficiaries will receive the benefit upon the insured's death.

While the other options present scenarios that could occur during the life of a policy, they do not accurately reflect what happens at the maturity of a limited-pay life policy. The policy does not simply end, the premiums do not stop until the specified period is finished, and renewal is not applicable in this context since a limited-pay life policy is already designed to provide coverage for the lifetime of the insured after the premium payments are completed.