Rhode Island Life Insurance Practice Exam

What does a Face Amount Plus Cash Value Policy pay upon the insured's death?

1. Face amount only

2. Cash value only

3. Face amount plus the policy's cash value

4. Face amount minus loans against the policy

The correct answer is: Face amount plus the policy's cash value

A Face Amount Plus Cash Value Policy pays the total of the face amount and the accumulated cash value upon the insured's death. This type of policy combines the guaranteed death benefit of the face amount with the savings element, or cash value, that has built up over time. When the insured passes away, the beneficiaries receive the face amount along with any cash value that may have accrued, providing them with a more substantial payout. This is beneficial as it not only covers the death benefit but also accounts for the savings component associated with the policy. In contrast to the other options, which focus solely on either the face amount or cash value independently, or consider loans against the policy, the chosen option emphasizes the comprehensive payout structure that characterizes this type of insurance policy. This understanding is crucial for policyholders seeking to maximize benefits for their beneficiaries.