South Carolina Life Insurance Practice Exam

If the owner of a whole life policy dies at age 80 with no outstanding loans, what portion of the death benefit will be paid to the beneficiary?

1. Nothing is paid

2. The full death benefit is paid

3. Only the cash value is paid

4. Half of the death benefit

The correct answer is: The full death benefit is paid

In the scenario described, if the owner of a whole life policy dies at age 80 with no outstanding loans, the full death benefit will be paid to the beneficiary. Whole life insurance policies are designed to provide a death benefit that remains in effect for the lifetime of the insured, as long as the premiums are paid. The death benefit is the amount that the insurer agrees to pay to the beneficiary upon the insured's death, and in the case of no outstanding loans, the cash value accumulated within the policy does not affect the face value of the death benefit. Therefore, the beneficiary receives the entire amount specified in the policy, ensuring financial security for the loved ones of the policyholder. This characteristic is a fundamental principle of whole life insurance, differentiating it from other forms of life insurance where benefits may be impacted by loans or withdrawals.