What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
The Correct Answer Is:
- Whole Life
The correct answer is “Whole Life.” A Whole Life insurance policy is designed to pay the face value (death benefit) either upon the death of the insured or when the insured reaches a specified age, typically age 100 or sometimes age 121, depending on the specific policy terms.
Here’s a detailed explanation of why this answer is correct, along with explanations of why the other options are not:
Whole Life – Correct Answer:
Whole Life insurance, also known as Permanent Life insurance, is a type of life insurance that provides coverage for the entire lifetime of the insured. One of the defining characteristics of Whole Life insurance is that it guarantees the payment of the face value (the death benefit) to the beneficiaries upon the death of the insured, regardless of when that occurs.
In addition to the death benefit, Whole Life policies often include a cash value component that grows over time and can be accessed by the policyholder during their lifetime.
Furthermore, Whole Life policies often include a feature known as the “maturity date,” which is typically set at age 100 or 121, depending on the policy terms. If the insured reaches this specified age without passing away, the policy “matures,” and the face value is paid out to the policyholder (or the policyholder’s estate).
This feature ensures that the policy will provide a benefit, either upon death or when the policy matures due to the insured reaching the specified age.
Key features of Whole Life insurance include:
- Lifetime Coverage: Whole Life insurance provides coverage for the entire lifetime of the insured, as long as premiums are paid as specified in the policy.
- Guaranteed Death Benefit: The death benefit is guaranteed and is paid to the beneficiaries upon the death of the insured.
- Maturity Benefit: Whole Life policies typically include a maturity date (e.g., age 100 or 121) at which point the policy matures, and the face value is paid out to the policyholder or the policyholder’s estate.
Now, let’s discuss why the other options are not correct:
Term Life insurance provides coverage for a specified term, such as 10, 20, or 30 years. It does not include a cash value component, and it does not offer a maturity benefit. Term Life insurance only pays the death benefit if the insured passes away during the term of the policy. It does not provide coverage for the insured’s entire lifetime, nor does it include a maturity date.
Credit Life insurance is a specialized type of insurance that is often offered by lenders to cover a specific debt, such as a mortgage, personal loan, or credit card balance. It is designed to pay off the outstanding debt if the insured borrower passes away. Credit Life insurance is not a comprehensive life insurance policy and does not typically include a maturity benefit or lifetime coverage.
Universal Life insurance is a flexible type of permanent life insurance that allows policyholders to adjust the death benefit and premium payments. While Universal Life policies provide lifetime coverage and may have a cash value component, they do not necessarily include a maturity benefit like Whole Life policies.
Whether a Universal Life policy pays out a death benefit at age 100 or another specified age depends on the specific terms and features of the individual policy.
In summary, a Whole Life insurance policy pays the face value either upon the death of the insured or when the insured reaches a specified age (often age 100 or 121).
This feature distinguishes Whole Life insurance from Term Life, Credit Life, and Universal Life, which do not offer the same combination of lifetime coverage and a maturity benefit. Whole Life insurance is designed to provide both financial protection for beneficiaries in the event of the insured’s death and a savings or investment component that matures at a specified age.