Question

Which of the following policies purchased at age 35 would provide the highest cash value at age 65?

O whole life policy.
O paid up at 65 life policy.
O term insurance to age 65.
O twenty payment life policy.
O they would all have the same cash value at age 65.

Answer 1

Term insurance to age 65 does not accumulate any cash value, while cash-value (whole) life insurance does. Therefore, a cash-value life insurance policy purchased at age 35 would provide the highest cash value at age 65.

Step-by-step explanation:

When considering which policy purchased at age 35 would provide the highest cash value at age 65, it's important to understand the different types of life insurance. Term insurance to age 65 is designed to provide coverage for a specific period, in this case until the purchaser is 65 years old. It typically does not accrue any cash value. On the other hand, cash-value (whole) life insurance not only offers a death benefit but also accumulates a cash value over time that the policyholder can use, making it a form of both protection and investment.

Given this fact, a term insurance policy would have a cash value of $0 at age 65, as it does not offer any investment component. However, a cash-value life insurance policy would have accumulated a certain amount of cash value as a living benefit over the 30 years, assuming that premiums are paid continuously and no loans or withdrawals are made from the policy.

Therefore, between term insurance and cash-value life insurance purchased at age 35, the policy that would provide the highest cash value at age 65 would undoubtedly be the cash-value life insurance.