What happens to the cash value of a 20-pay life policy at maturity?

What happens to the cash value of a 20-pay life policy at maturity?

• A. It is zero
• B. It equals the face amount
• C. It is less than the face amount
• D. It must be withdrawn by the policyholder

Answer: (B)

In a 20-pay life policy, the cash value accumulates over the 20-year payment period and is designed to equal the face amount of the policy at maturity. When the policy matures, typically at the end of the 20 years, the policyholder has the option to receive the cash value, which has grown to match the face value of the insurance coverage. This feature means that during the premium payment period, while the policy builds cash value, it also serves a dual purpose as a life insurance protection tool—ensuring that the beneficiary receives the face amount in case of the insured's death during the policy term. Upon maturity, the policyholder can access the full cash value, which is equal to the insurance coverage originally promised, providing a significant financial benefit. In this context, it is clear that at maturity, the cash value is purposely designed to be equivalent to the face amount of the policy, making it a financially advantageous product for policyholders who maintain their premiums throughout the duration of the policy.

In a 20-pay life policy, the cash value accumulates over the 20-year payment period and is designed to equal the face amount of the policy at maturity. When the policy matures, typically at the end of the 20 years, the policyholder has the option to receive the cash value, which has grown to match the face value of the insurance coverage.

This feature means that during the premium payment period, while the policy builds cash value, it also serves a dual purpose as a life insurance protection tool—ensuring that the beneficiary receives the face amount in case of the insured's death during the policy term. Upon maturity, the policyholder can access the full cash value, which is equal to the insurance coverage originally promised, providing a significant financial benefit.

In this context, it is clear that at maturity, the cash value is purposely designed to be equivalent to the face amount of the policy, making it a financially advantageous product for policyholders who maintain their premiums throughout the duration of the policy.