Certified Financial Consultant (CFC) Practice Exam

When would a 20-pay whole life policy endow?

1. When the insured retires

2. When the insured reaches age 100

3. When the policyholder cancels the policy

4. At the end of the policy term

The correct answer is: When the insured reaches age 100

A 20-pay whole life policy is designed to be fully paid up after 20 years of premium payments. The term "endow" in this context refers specifically to the point at which the cash value of the policy equals the death benefit, allowing the policy to effectively "mature." In the case of whole life policies, this typically happens when the insured reaches a specified age, which is often set at age 100. At that point, the policy is considered to have matured, and the insured would either receive the death benefit or the cash value of the policy, assuming they are still alive. This maturation signifies that the policy has fulfilled its purpose of providing a death benefit and has accumulated sufficient cash value. Thus, the correct option is linked to a specific age milestone, which is the key determinant for the endowment of a whole life policy. The other choices do not align with the characteristics of a 20-pay whole life policy: retiring does not automatically cause a policy to endow; canceling a policy would not create a situation of endowment; and the end of the policy term refers more generally to the duration of premium payments without indicating the specific maturity characteristic associated with age.