Rhode Island Life Insurance Practice Exam

What benefit does a life insurance policy provide upon the death of the insured?

1. Living Benefits

2. Cash Value

3. Death Benefit

4. Premium Refund

The correct answer is: Death Benefit

A life insurance policy is primarily designed to provide a death benefit, which is a monetary sum paid to the beneficiaries upon the death of the insured. This benefit serves as financial support to cover immediate expenses, replace lost income, or manage other financial obligations that may arise due to the death of the insured. The death benefit is a core feature of life insurance policies, ensuring that the policyholder's loved ones are protected financially after the policyholder's passing. In contrast, living benefits refer to provisions that allow policyholders to access certain benefits while they are still alive, typically related to chronic or terminal illnesses. Cash value represents the savings component of a permanent life insurance policy, accumulating over time, but it is different from the death benefit. A premium refund might be applicable in some specific types of policies, but it does not represent the primary purpose of life insurance, which is to provide a death benefit. Thus, the death benefit is the most crucial and defining characteristic of life insurance, giving financial peace of mind to policyholders and their beneficiaries.