To address the question of the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old, we must consider the fundamental properties of whole life insurance policies.
Whole life insurance, often referred to as "whole of life assurance," is a type of permanent life insurance that remains in force for the insured's entire lifetime, provided the premiums are paid. One of the key features of whole life insurance is that it accumulates a cash value over time. This cash value is guaranteed and typically grows at a fixed rate.
Now examining the potential responses:
1. Greater than the policy's face amount: This is not applicable, as the cash value is not designed to exceed the face amount of the policy. The face amount, or death benefit, is the guaranteed sum that the beneficiaries receive upon the insured's death.
2. Less than the policy's face amount: This is plausible since whole life policies build up cash value over time, but this built-up cash value is usually less than the face amount. However, it remains consistent with the policy's assurances.
3. Depends on the performance of the separate underlying investment account: This is not applicable to whole life insurance policies as they do not rely on external investments. They grow at a guaranteed rate, unlike variable or universal life insurance policies.
4. Equal to the policy's face amount: This is the provided accurate assessment for the given condition.
Putting all information together, the correct response to Question 5 is:
- Equal to the policy's face amount
Thus, when the insured individual turns 65 years old, the guaranteed cash value of their whole life insurance policy is equal to the policy's face amount.
