Endowment policies are designed to stress savings over protection and endow at a predetermined date or age, typically before age 100. Which statement best describes this type?

• A. It remains a term policy with no cash value.
• B. It ends when the insured reaches age 65 and has no cash value.
• C. It is a permanent policy that ends at a predetermined date, with higher premiums and cash values accumulate.
• D. It offers only short-term coverage with no savings component.

Answer: (C)

Endowment policies blend life protection with a savings component and are designed to mature at a specific date or age (often before age 100). Because they’re meant to accumulate value over time, these are permanent policies, not term policies. The premiums are typically higher than for pure-term coverage to fund both the ongoing protection and the guaranteed cash value that builds up. At maturity, the policy pays out the face amount or the accumulated cash value, whichever is higher, and if the insured dies before maturity, a death benefit is paid. This combination of a guaranteed savings buildup and a predetermined end date is what distinguishes endowments from policies that offer only temporary coverage or no cash value.