South Carolina Life Insurance Practice Exam

Under a whole life policy, what condition must be met for the policy to pay the death benefit to a beneficiary?

1. The premiums must be paid for a specified time period

2. The insured must reach the age of 100

3. The cash value must exceed the total premiums paid

4. The policy must be in force for at least five years

The correct answer is: The premiums must be paid for a specified time period

For a whole life policy to pay the death benefit to a beneficiary, it is essential that premiums are paid as stipulated in the policy. This requirement ensures that the policy remains in force and valid at the time of the insured's death. Whole life insurance is designed not only to provide a death benefit but also to accumulate cash value over time. However, if premiums are not consistently paid, the policy could lapse, leading to the loss of benefits, including the death benefit. The other conditions mentioned do not directly affect the payout of the death benefit. For instance, while reaching the age of 100 signifies the policy has fulfilled its purpose by its design and may trigger surrender values or maturity, it does not relate to the conditions at the time of the insured's death. Likewise, the cash value exceeding the total premiums paid or a minimum number of years for the policy to be in force does not directly tie into the immediate requirement for claiming a death benefit. The critical factor remains the payment of premiums to keep the policy active.