What is policyholder's situation at the Maturity Date of a Life policy?

[LostDollar]

(Caveat, not an agent)

I would suggest you read your policy.
Maturity provisions are clearly spelled out.
Guaranteed benefit expiry date is not the same thing as policy maturity.
Your benefit may no longer be guaranteed but that does not mean it is not inforce.
If you have the opportunity to copy and post the maturity provisions from the policy you will probably get a better answer.
Technically the above poster is correct

Thank you for your comment.

I am not the best careful reader but I have scanned the policy documents twice and I have not found any mention of the word maturity.

So I was partly wrong. My wife found one mention of Policy Maturity-but it is in a STATEMENT OF POLICY COST AND BENEFIT INFORMATION. I am unable to ascertain whether or not that schedule (statement) is formally a part of the policy but the concept is used within the formal policy in a statement relating to endowment:

Cash values for policy years after those shown in the Table of Guaranteed Cash Value Benefits are calculated in accordance with the Standard Nonforfeiture Law method using formulas appropriate for an endowment at age 100 life insurance policy, as defined in the laws of the state in which this Policy was delivered. After age 100, the death benefit and Net Cash Value are at all times equal to the Policy Face Amount after reduction for any Policy Debt in effect at age 100.

To my mind those policy statements conflict directly with this paragraph in information accompanying the pre-purchase illustration I received:

Whole Life Insurance
The traditional non-participating whole life policy you are considering offers permanent protection with a guaranteed single premium, cash value and death benefit. This policy has no maturity age. For projection purposes, this proposal's maturity age is deemed to be age 100.

That carrier statement also directly contradicts JD's statement above that a whole life policy must have an endowment (maturity) date. There is no way as a non-agent consumer I would have know I needed to question that statement.

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Guaranteed benefit expiry date is not the same thing as policy maturity.

(side note, expiry is carrier's spelling, not mine. Wow! learned something here--That is a British or Canadian word for the end of a period for which something is valid.)

For this policy it is (the same thing). The maturity or endowment date is the policy anniversary (Guaranteed (Death) Benefit Expiry Date) following my 100th birthday.

 

[Allen Trent]

At the maturity date, the cash value and death benefit are equal, so the policy pays out..

I dont believe this is true. Each product type (term, UL-IUL-VUL, WL) all have varying designs & laws impacting maturity.

Even with WL, if it is a participating policy the dividends would have bought Paid up additions death benefit & be over & above the base policy death benefit, meaning the total CV could exceed the original face amount purchased

 

[jdeasy]

I dont believe this is true. Each product type (term, UL-IUL-VUL, WL) all have varying designs & laws impacting maturity.

Even with WL, if it is a participating policy the dividends would have bought Paid up additions death benefit & be over & above the base policy death benefit, meaning the total CV could exceed the original face amount purchased

You're right on the other products. But whole life has to endow at some point or it's not whole life.

 

[Newby]

(Caveat, not an agent)

When a whole life policy endows, does that mean that a death benefit is no longer payable to the policy beneficiaries and that the policy must be surrendered for payement of its cash value to the policy owner?

No. In funeral homes I have reviewed many policies where people have outlived their endowment year. They don't have to take the death benefit at the time unless they want to.

 

[Allen Trent]

You're right on the other products. But whole life has to endow at some point or it's not whole life.

Agree, but he was saying the CV & Death benefit will be equal at maturity. That may not be true even with WL. clients that had dividend option of "accumulate" which was common for decades, would have those Dividend Accumulations over & above the base policy CV.

 

[Allen Trent]

No. In funeral homes I have reviewed many policies where people have outlived their endowment year. They don't have to take the death benefit at the time unless they want to.

I dont believe this is true for all WL. Without the Carrier having a "maturity extension rider", they can pay out the cash value to the client at maturity.

Because it is the cash value being paid out, not the death benefit, the owner can be taxed on the taxable gain in the policy. This is why many carriers moved to the age 120 to avoid the unfortunate tax issue for the client turning age 100. It really is no different than WL policies from days gone by that were called Endowment at age 65 or age 85. They matured at those ages & the carrier paid the cash value, not death benefit & sent a 1099 for taxable gain

 

[Newby]

I dont believe this is true for all WL. Without the Carrier having a "maturity extension rider", they can pay out the cash value to the client at maturity. Because it is the cash value being paid out, not the death benefit, the owner can be taxed on the taxable gain in the policy

I'm not saying they CAN'T take it. I'm saying they don't have to.
Many people in that situation are in nursing homes and on Medicaid. If they take a payout like that instead of waiting for death it will interrupt their Medicaid benefits until that money is spent on their nursing home care. Then they would have to requalify for Medicaid. Then when they die there is not death benefit for the funeral.
That's not what most families choose to do. They just wait and claim it as a death benefit.

 

[Allen Trent]

I'm not saying they CAN'T take it. I'm saying they don't have to.
Many people in that situation are in nursing homes and on Medicaid. If they take a payout like that instead of waiting for death it will interrupt their Medicaid benefits until that money is spent on their nursing home care. Then they would have to requalify for Medicaid. Then when they die there is not death benefit for the funeral.
That's not what most families choose to do. They just wait and claim it as a death benefit.

Agree, but you are seeing that only because that carrier has a maturity extension privilege or something in the contract that allows it. Not all carriers allow that to be the consumer choice. They all should in my opinion

 

[scagnt83]

(Caveat, not an agent)





So I was partly wrong. My wife found one mention of Policy Maturity-but it is in a STATEMENT OF POLICY COST AND BENEFIT INFORMATION. I am unable to ascertain whether or not that schedule (statement) is formally a part of the policy but the concept is used within the formal policy in a statement relating to endowment:



To my mind those policy statements conflict directly with this paragraph in information accompanying the pre-purchase illustration I received:



That carrier statement also directly contradicts JD's statement above that a whole life policy must have an endowment (maturity) date. There is no way as a non-agent consumer I would have know I needed to question that statement.

--------------------------------------------------------------------------------------



(side note, expiry is carrier's spelling, not mine. Wow! learned something here--That is a British or Canadian word for the end of a period for which something is valid.)

For this policy it is (the same thing). The maturity or endowment date is the policy anniversary (Guaranteed (Death) Benefit Expiry Date) following my 100th birthday.

What all that says, is that for illustration purposes, they show age 100 as maturity. But there is no point you are forced to take the payout yourself based on that language.

 

[jdeasy]

What all that says, is that for illustration purposes, they show age 100 as maturity. But there is no point you are forced to take the payout yourself based on that language.

I don't think that's his concern. Seems to me he's worried about not having coverage at that point and no payout at all from the company.