When does a typical whole life policy endow, and what funds the death benefit?

• A. It endows at age 110, funded by policy dividends.
• B. It endows at age 105, funded by premiums only.
• C. It endows at age 100, with the death benefit funded by cash value and pure insurance (mortality charge).
• D. It endows at age 95, funded by loans against cash value.

Answer: (C)

In whole life, part of each premium goes toward building cash value and part covers the cost of insurance (the mortality charge). The policy also has a maturity feature: many traditional whole life contracts endow at age 100, meaning if the insured is still alive at that age, the policy pays out the face amount as a maturity benefit.

The death benefit is funded by two sources: the cash value that has accumulated over time and the ongoing pure insurance cost (mortality charge). The cash value provides a savings component, while the mortality charge covers the risk of death. If the insured dies before reaching endowment, the death benefit is paid from these funds (subject to any outstanding policy loans or charges). This combination—endowing at age 100 and funding the benefit with cash value plus the mortality charge—is why this option is correct.