Rhode Island Life Insurance Practice Exam

What type of life insurance policy pays out upon the death of the last insured person?

1. Term Policy

2. Whole Life Policy

3. Survivorship Policy

4. Modified Life Policy

The correct answer is: Survivorship Policy

The correct answer is a survivorship policy, which is designed specifically to provide a payout upon the death of the last insured individual. This type of policy is typically used in estate planning, particularly for couples or families, allowing them to leave a financial benefit to their heirs after both insured individuals have passed away. Survivorship policies can be advantageous in terms of lower premiums compared to traditional joint life insurance policies since the benefit is only paid out after the last insured dies. This structure appeals to those looking to cover estate taxes or provide a financial legacy for their beneficiaries after both partners have deceased. Comparatively, a term policy provides coverage for a specified period and pays a death benefit only if the insured dies within that term. Whole life policies offer lifelong coverage and include a cash value component, but they pay benefits upon the death of the insured individual, not after the last person in a couple. Modified life policies also provide lifelong coverage with adjustable premiums, but similarly to whole life, they pay out on the death of the individual policyholder rather than waiting for both insured individuals to pass.