A whole life insurance policy is a permanent form of life insurance that provides coverage for the insured’s entire lifetime, as long as premiums are paid. One of its key features is endowment, which occurs when the policy’s cash value equals the death benefit. But when exactly does a whole life policy endow, and what happens when it does?
In this topic, we’ll explore what endowment means, when it happens, and how it affects policyholders.
What Does Endowment Mean in Whole Life Insurance?
Endowment in a whole life policy refers to the moment when the cash value of the policy becomes equal to the face value (death benefit). At this point, the insurance company considers the policy fully matured, and the insured is typically paid the policy’s cash value.
Traditionally, most whole life policies are designed to endow at age 100, though newer policies may extend this to age 121 due to increasing life expectancies.
When Does a Whole Life Policy Endow?
A whole life policy typically endows at a predetermined age, usually one of the following:
1. Age 100 (Traditional Whole Life Policies)
Older whole life insurance policies are structured to endow when the policyholder reaches age 100. This means that if the insured is still alive at this age, the insurer pays out the full death benefit as a lump sum.
2. Age 121 (Modern Whole Life Policies)
With advances in healthcare and longer life expectancy, many newer policies now endow at age 121 instead of 100. This allows the policy to accumulate more cash value growth while keeping the death benefit intact.
3. Earlier Endowment (Certain Paid-Up Policies)
Some whole life policies are designed to endow earlier, depending on factors such as:
- Limited Pay Whole Life – Policies that are fully paid in 10, 20, or 30 years may endow earlier than age 100.
- Dividend Growth – If dividends are reinvested into the policy, the cash value can reach the death benefit earlier, causing the policy to endow sooner.
What Happens When a Whole Life Policy Endows?
1. Lump Sum Payment
When a whole life policy endows, the insurance company may pay the policyholder a lump sum equal to the death benefit. This can be used for retirement, medical expenses, or inheritance planning.
2. Continued Coverage (Extended Policies)
If the policy endows at age 121, some insurers allow coverage to continue without additional premiums, ensuring the death benefit remains intact.
3. Policy Cancellation or Surrender
Some policyholders choose to surrender the policy before endowment, taking the accumulated cash value rather than waiting for full maturity. However, this may have tax implications.
Can a Whole Life Policy Endow Early?
Yes, certain situations can lead to early endowment, such as:
- Overfunding the policy (paying more into the cash value).
- High dividend earnings, which accelerate cash value growth.
- Paid-up additions increasing the policy’s value faster.
A whole life policy typically endows at age 100 or 121, meaning its cash value equals the death benefit. When this happens, the insurer may pay a lump sum, continue coverage, or offer other options. Understanding endowment can help policyholders plan their financial future effectively.