Indiana State Life and Health Insurance Practice Exam

What is the face amount of a Whole Life policy paid?

1. At the policy's maturity date only

2. When the insured dies or at the policy's maturity date, whichever happens first

3. Only when the insured dies

4. When the policy is surrendered

The correct answer is: When the insured dies or at the policy's maturity date, whichever happens first

The face amount of a Whole Life policy is paid when the insured dies or at the policy's maturity date, whichever happens first. This means that the insured can either receive the face amount upon their death, providing financial security to beneficiaries, or the policyholder gets it when the policy reaches maturity. Whole Life insurance is designed to provide lifelong coverage and is distinct because it accumulates cash value over time, which may be accessed while the insured is alive or is delivered as part of the death benefit. The concept of maturity is essential in life insurance, as it allows for the possibility of a payout at a predetermined time in addition to the death benefit. This is a key feature that differentiates Whole Life policies from term policies, which only pay out upon death during the term. Understanding that the face amount can be disbursed in two scenarios reinforces the critical purpose of Whole Life insurance in financial planning.