“Policy reserves become especially important for whole life policies. With a whole life policy, the insurance company specifies an age at which the policy’s face value will be paid as an endowment to the policy owner if the insured person has not died by that time. The insurance company must accumulate reserves during the life of the policy to be able to make that payment. The policy reserve can be defined as follows: Policy reserve = Present value of future benefits – Present value of future net premiums.”
Why do insurers have to pay the face value if insured doesn’t die? Don’t they just get to keep the premiums without paying a benefit (except for cash value)?