Kayla buys a whole life policy when she is 40 and pays premiums on it until she is 60. She decides to retire at 60, has no dependents and no debts, and realizes she really doesn't need the death protection any longer. She is now concerned about generating a lifetime income during her retirement. What option does a whole life policy typically offer that could best help her with this financial need?

Question

Quizplus · Accepted Answer

The annuity conversion option allows Kayla to use the cash value from her whole life policy to buy an annuity from the insurer that can provide her with a guaranteed income for the rest of her life. This option provides a reliable and stable source of income during her retirement years. Option A (forfeiture of coverage provision) would only provide her with a lump sum payment, which may not be sufficient for her financial needs during retirement. Option B (paid-up whole life option) would also not provide her with a guaranteed income stream and would only reduce her death benefit.

Kayla Buys a Whole Life Policy When She Is 40