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, but if the insured lives to a specified age, the policy will pay the face amount to the policyowner. What type of life insurance policy is this?
- AWhole Life
- BEndowment
- CUniversal Life
- DTerm Life
Show answer & explanationAnswer & explanation
Correct answer: B. Endowment
An endowment policy pays the face amount upon the insured's death before a specified date or if the insured is still living at the end of the endowment period. This unique feature distinguishes it from other life insurance types.
Why the other options are wrong
- A. Whole life policies provide lifetime coverage and build cash value, but do not pay out the face amount if the insured lives to a specific age unless it's surrendered.
- C. Universal life policies offer flexible premiums and death benefits, and cash value accumulation, but do not have a guaranteed payout at a specific age if the insured is still living, separate from cash value withdrawal.
- D. Term life policies only pay a death benefit if the insured dies within a specific term and have no living benefits or payouts at a certain age.
Endowment Policy
An endowment policy is a type of life insurance that pays out a lump sum to the policyholder on a specified date (maturity) or to a beneficiary if the insured dies before that date.
- Matures at a specific age or date
- Pays out if insured dies before maturity
- Pays out if insured lives to maturity
- Often used for savings or specific future financial goals
Memory trick: Endowment ensures your 'end' goal, dead or alive.