What Does Endow at 100 Mean in Life Insurance?

If you have a whole life insurance policy, you may have come across the term “endow at 100” and wondered what it means. Endowing at a certain age is a feature of some types of permanent life insurance policies.

When you buy a whole life insurance policy, you are purchasing lifetime coverage. As long as you pay the premiums, the policy remains in effect until you pass away, at which point the death benefit is paid to your beneficiaries.

Most whole life insurance policies are designed to endow at age 100. Endow means that the policy’s cash value grows to equal the death benefit by the time the insured individual turns 100 years old.

Here’s a closer look at what endowing at 100 entails and what it means for your whole life insurance policy.

What Does Endowing at 100 Mean?

Endowing at age 100 refers to a whole life insurance policy expiring when the insured individual turns 100 years old. Most whole life policies are written this way.

Here’s how it works:

• You purchase a whole life insurance policy at age 40 with a $100,000 death benefit.
• The policy accumulates cash value over time as you pay your premiums.
• By the time you turn 100, the cash value has grown to equal the full $100,000 death benefit.
• At this point, the policy has fully “endowed” and will expire.

Once the policy reaches the endowment age (100 in this example), a few things could happen:

• The insurance company pays you the full cash value equal to the death benefit. For instance, with a $100,000 policy, you would receive $100,000. The insurer would close out the policy at this point.

• The insurer grants an extension if you want to continue the policy. You would keep paying premiums to maintain your coverage past age 100.

• The insurer stops collecting premiums but keeps the policy active until you pass away. This allows the policy to pay out upon your death without you paying any more premiums.

Endowing at 100 is a feature built into most whole life insurance policies when you initially purchase coverage. It means you have guaranteed lifetime coverage until that age.

Some insurers may allow the endowment age to be extended past 100 if the policyholder is still living at that point. But this is not guaranteed when you first buy the policy.

Why Do Policies Endow at 100?

There are a few reasons why whole life insurance policies endow at age 100:

• Very few people live past 100. When these policies were first created in the 1800s, living to 100 was extremely rare. The insurers knew that endowing policies at this advanced age allowed them to offer lifetime coverage while keeping premiums affordable.

• It prevents policies from lasting indefinitely. Insurers need a cutoff point for coverage. Endowing policies at a set age allows the insurance company to close out policies in a timely manner.

• It aligns with the intended purpose. Whole life insurance is meant to provide lifetime coverage in case you pass away prematurely. Endowing policies at age 100 coincides with this objective.

• It factors in life expectancy. Although life expectancies have increased over time, 100 years old still far exceeds the average lifespan. Endowing at this age fits with most people’s life expectancy.

So in essence, endowing policies at 100 provides lifelong coverage while preventing policies from lasting forever. This age was chosen when these products were first created in the 1800s and has stuck as a standard endowment age for whole life policies.

What Happens When a Policy Endows?

As mentioned above, a few things could happen when your whole life insurance policy reaches the endowment age:

• The insurer pays out the cash value. This is the most common scenario. For example, if you have a $100,000 policy that endows at 100, the insurance company will pay you the full $100,000 cash value and close out the policy.

• You can extend the policy. Some insurers allow policyholders to continue the policy past age 100 if they are still living. You would keep paying premiums to maintain your coverage.

• The policy stays active until you pass. The insurer stops collecting premiums but keeps the policy active to pay beneficiaries upon your death.

The specifics depend on the insurance company and the provisions outlined in your policy contract. Most commonly, the insurer will pay out the cash value equal to the death benefit and terminate the policy.

It’s important to understand how endowment works so you know what will happen to your whole life insurance policy once you reach that age. This allows you to plan appropriately.

For example, if you know your policy will endow at 100 and pay out the full death benefit, you may want to use some of the cash to purchase a new policy that extends past age 100. Or you may decide to use the payout to supplement your retirement income.

Can You Extend a Policy Past Age 100?

Some insurers allow policyholders to extend their whole life insurance coverage past the endowment age if they are still living.

Extending a policy requires filling out an application and undergoing a new underwriting process. Here are some key points:

• You will need to provide current health and medical records. Essentially you are applying for a new policy.

• Premiums will be much higher because you are over 100 years old. Expect to pay significantly more to keep coverage.

• Most insurers will only grant one-year extensions until you reach around 120 years old.

• Policy provisions may change, such as cash value continuing to accrue.

• Death benefit may stay the same or be reduced.

Not all insurance companies offer extensions past the endowment age. And even if they do, approval is not guaranteed due to your advanced age.

If continuing your coverage is important, start the application process well in advance of turning 100. Work with your insurance agent or financial advisor to understand your options.

Sample Whole Life Endowment Scenarios

Here are a few examples to illustrate how endowing at 100 works:

Example 1:

• 45-year-old man purchases a whole life policy with a $250,000 death benefit
• He pays the fixed premiums every year until he turns 100
• By age 100, the cash value in the policy has grown to equal the full $250,000 death benefit
• The insurer pays him the $250,000 cash value and closes out the policy

In this case, the standard endowment at 100 scenario played out. Once the insured individual reached age 100, the insurer paid the cash value equal to the death benefit.

Example 2:

• 60-year-old woman buys a whole life policy with a $100,000 death benefit
• She pays premiums until age 100, but passes away at age 105
• Because she outlived the endowment age, the insurer kept the policy active past 100
• When she passed at 105, the insurer paid the $100,000 death benefit to her beneficiaries

Here the woman lived past the endowment age, so the insurer continued the policy until her death in order to pay out the full death benefit.

Example 3:

• 35-year-old couple purchases a joint whole life policy with a $500,000 death benefit
• At age 100, the cash value is $250,000 since both are still living
• The insurer grants a one-year extension until age 101
• When the husband passes at 101, the insurer pays a $500,000 death benefit

This illustrates how an extension allowed the death benefit to remain intact. Without the extension, the payout at 100 would have only been $250,000.

As you can see, endowment scenarios can vary. But in most cases, reaching the endowment age results in the policy terminating and the cash value being paid out.

Options for Handling Policy Endowment

As your whole life insurance policy approaches the endowment age, you have a few options:

• Take the cash payout. For many insureds, receiving the cash value equal to the death benefit is the best option. This lump sum payout can provide income, pay off debt, or cover unexpected costs during retirement.

• Use it to buy a new policy. You may want to take some or all of the payout and use it to purchase a new policy with extended coverage. This allows you to maintain life insurance past age 100.

• Convert to an annuity. Another option is to do a 1035 exchange into an annuity product that provides guaranteed income for life. This can create income flow during retirement.

• Supplement retirement savings. If you don’t need life insurance anymore at that stage, the cash value can help pad your retirement savings and investments.

• Pay premiums for extensions. As mentioned, some insurers allow policy extensions in one-year increments if you keep paying premiums.

• Do nothing. If the insurer keeps your policy active until you pass, you don’t need to take any action at the endowment age.

Consult with your financial advisor or insurance agent as you get closer to 100. They can explain your choices and help you decide the best course of action when your policy reaches the endowment age