Question

K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65 or to her beneficiary if she dies before age 65. K purchased which type of policy?

a) Whole Life
b) Term Life
c) Universal Life
d) Endowment Policy

Answer 1

K purchased an endowment policy, which pays the face amount either upon reaching age 65 or to a beneficiary if the insured dies before that age. It includes both insurance and a savings element that can accumulate cash value.

Step-by-step explanation:

The student purchased an endowment policy, which is a life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death. Here the policy will pay out the face amount if the insured, K, lives to age 65 or if she dies before age 65, the benefit will go to her beneficiary. This type of policy combines the risk protection of life insurance with a savings component. The savings element can accumulate a cash value against which the policyowner can borrow funds or, in some instances, withdraw to help meet future goals such as funding for retirement.