Rhode Island Life Insurance Practice Exam

In which scenario does the insurer have to pay the face amount of a policy?

1. Upon cancellation of the policy

2. Upon the insured's reaching retirement age

3. At the end of the insured's life

4. Upon the insured's death while the policy is in force

The correct answer is: Upon the insured's death while the policy is in force

The insurer is obligated to pay the face amount of a policy upon the insured's death while the policy is in force because life insurance is specifically designed to provide financial protection to beneficiaries in the event of the policyholder's death. The face amount represents the death benefit that the insurer agrees to pay when the insured passes away, as long as the policy is active and premiums have been paid. This stipulation is foundational to life insurance contracts, ensuring that beneficiaries receive a specified sum to help cover expenses and provide support after the insured's death. In scenarios where the policy is canceled or the insured reaches retirement age, the conditions for payout differ significantly; these do not typically trigger a payment of the face amount. Therefore, the obligation to pay arises directly from the death of the insured while the policy remains valid.