Rhode Island Life Insurance Practice Exam

If a policyholder dies during the 20-year endowment period after paying for 10 years, what will the insurance company pay the beneficiary?

1. The cash value accrued

2. The premiums paid

3. $10,000 death benefit

4. $20,000 death benefit

The correct answer is: $20,000 death benefit

In an endowment policy, the insurance company pays a specified amount, known as the death benefit, if the policyholder dies within the endowment period. In this scenario, the policyholder was covered under a 20-year endowment policy and passed away after 10 years of premium payments. Since the policyholder died during the endowment period, the insurance company is obligated to pay the designated death benefit as stipulated in the policy. Typically, this benefit is a fixed amount established at the time the policy was issued, which in this case is $20,000. The key aspect of an endowment policy is that it combines life insurance with a savings component, providing the beneficiary with the death benefit if the insured dies within the term, rather than just returning premiums or cash value which are not applicable in this case. The other options, such as cash value or premiums paid, do not apply because the policy is still active, and the death benefit will be the primary payout. Therefore, the correct response reflects the insurance company’s obligation to pay the predetermined benefit amount established in the policy, ensuring financial security for the beneficiary.