Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceMedium
A life insurance policy states that the insurer will pay the policy proceeds to the beneficiary if the insured dies within 20 years, or if the insured is still living after 20 years, the policy will pay the face amount to the policyowner. What type of policy is this?
- AWhole Life
- BEndowment
- CTerm Life
- DUniversal Life
Show answer & explanationAnswer & explanation
Correct answer: B. Endowment
An endowment policy is characterized by paying the face amount upon the insured's death within a specified term, or if the insured survives to the end of that term, the face amount is paid to the policyowner. This dual payout feature makes it distinct from other life insurance types.
Why the other options are wrong
- A. Whole life policies provide lifetime coverage and accrue cash value, but do not 'endow' at a specific age or term.
- C. Term life policies only pay a benefit if the insured dies within a specified term; they do not pay out if the insured survives the term.
- D. Universal life policies offer flexible premiums and death benefits, and cash value accumulation, but do not have a guaranteed endowment feature at a specific term.
Endowment Policy
A type of life insurance that pays the face amount upon the insured's death during a specified term, or pays the face amount to the policyowner if the insured survives to the end of the term.
- Matures at a specific age or time.
- Guarantees payout whether insured lives or dies within the term.
- Highest premium among traditional life policies.
Memory trick: Endow: Live or die, payout's nigh.