Maturing at Age 100: Policy Language to Look Out For

October 12, 2021

Age 100

More insureds are reaching age 100 than ever before, potentially creating an unexpected issue with your life insurance portfolio. It is not uncommon for policies that were issued before the late 2000’s to have a maturity date of the insured’s 100th birthday or sooner. It is important to understand your policies and have a plan in place that addresses what happens to the life insurance at the insured's age 100.

Does your insurance policy portfolio have a hidden ticking time bomb?

In some cases, the time bomb appears when the policy matures and the death benefit completely goes away. At that point, the carrier is only responsible to pay the cash surrender value to the beneficiary. This could be catastrophic for policy owners as many policies that are minimally funded (have little to no cash surrender value) would be in a situation where they have paid premiums for little-to-nothing in return.

Examples of policy language to look out for:

  • American General policies without the Maturity Extension Rider will pay:
    • “The proceeds on the maturity date will be the cash surrender value.”
    • The maturity date is the next policy anniversary after the insured attains age 100.
  • Transamerica
    • “Death benefit payable at death of insured before age 100. Net cash value payable at insured’s age 100.”
  • Met Life
    • “If this policy is in force beyond the insured’s attained age 100, the death benefit will be 101% of the policy’s cash surrender value.”
    • Met Life does have a Coverage Continuation Rider (CCR) that allows the death benefit to be paid after the insured attains age 100 but the rider requires a significant annual premium to keep in force. If the rider lapses, it cannot be added back to the policy.
  • Wilco/Conseco Life
    • The maturity date is the date on which insurance coverage is scheduled to terminate, and the cash surrender value is paid to the owner.”
  • Lincoln Permanent Policy with Supplemental Term Insurance
    • The supplemental term insurance death benefit will terminate “when the insured reaches age 100.”

As you can see from the policy language above, it is imperative to understand what happens at age 100 or the maturity date of the life insurance policy.

There are a couple solutions:

  1. Contact the life insurance carrier to see if they will extend the policy's maturity date.
  2. Legacy Giving would recommend that the policy owner obtain life expectancy reports on the insured from an independent source to understand the probability of the insured living past the maturity date.
    • If the policy owner is comfortable with the probability, they should keep the policy.
    • If the policy owner is uncomfortable with the probability, they could transfer the maturity risk by selling the policy to an institutional buyer that could afford to take the risk.

 

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