Which term describes the condition when the cash value of a whole life policy reaches the contractual face amount?

Which term describes the condition when the cash value of a whole life policy reaches the contractual face amount?

• A. Deferred
• B. Endow
• C. Maturity
• D. Lapse

Answer: (B)

In a permanent life policy, cash value builds up over time as part of the premium pays toward future benefits. The moment the cash value grows to equal the policy’s face amount, the contract is said to endow. This endowment means the policy has effectively matured: the owner can receive the face amount (often by surrendering the policy for that cash value), and the policytypically ends unless other options apply. This isn't about postponing benefits (deferred) or about the policy merely continuing until a future date (maturity is a related concept but not the event described here). It also isn’t about losing coverage for nonpayment (lapse). So the correct term for the cash value catching up to the face amount is endowment.

In a permanent life policy, cash value builds up over time as part of the premium pays toward future benefits. The moment the cash value grows to equal the policy’s face amount, the contract is said to endow. This endowment means the policy has effectively matured: the owner can receive the face amount (often by surrendering the policy for that cash value), and the policytypically ends unless other options apply.

This isn't about postponing benefits (deferred) or about the policy merely continuing until a future date (maturity is a related concept but not the event described here). It also isn’t about losing coverage for nonpayment (lapse). So the correct term for the cash value catching up to the face amount is endowment.