What does a fully discrete 15-pay whole life insurance policy of 200,000 on a 50-year-old mean?

• A. It is a 200,000 life insurance policy on a 50-year-old with 15 premiums paid only during the first 15 years.
• B. It is a 200,000 life insurance policy on a 50-year-old with premiums paid for life.
• C. It is a 200,000 life insurance policy on a 50-year-old funded by a single premium.
• D. It is a 100,000 life insurance policy on a 50-year-old with 15 years of payments.

Answer: (A)

A fully discrete 15-pay whole life policy means you pay 15 level premiums at fixed times (typically yearly) and the coverage lasts for the insured’s whole life. The policy amount is 200,000, and it is issued on a 50-year-old. So you would pay 15 annual premiums, after which no more premiums are due, but the death benefit of 200,000 continues to be paid upon death at any age thereafter. The key ideas are: 15 payments only, premiums paid at discrete times, and lifelong coverage with a fixed death benefit of 200,000.

This matches the idea of 15 equal annual premiums funded over the first 15 years, with a 200,000 death benefit for a life-long policy on a 50-year-old. It’s not a single premium or a policy where premiums extend for life, and the benefit isn’t 100,000.