Rhode Island Life Insurance Practice Exam

Which of these is NOT a reason for purchasing life insurance on the life of a minor?

1. If both parents were to die, it would provide death benefits to the child

2. To ensure the child receives education funding

3. To provide financial security for the child in case of a family emergency

4. To accumulate cash value for future use

The correct answer is: If both parents were to die, it would provide death benefits to the child

Purchasing life insurance on the life of a minor is often motivated by various reasons, but we need to identify which choice does not align with typical motivations. When considering the primary purposes of life insurance for minors, one of its significant roles is to provide financial security and cover future needs. While options related to education funding, financial security in family emergencies, and accumulating cash value align well with typical motivations of securing a child's future, the assertion that life insurance would provide death benefits to the child is not a valid reasoning. Although a life insurance policy can pay out a death benefit in the event of a tragedy, the phrasing suggests that the child would directly benefit from the death of the parents through the insurance policy—this is not typically the case. Life insurance policies are usually designed to provide financial support to the dependents or beneficiaries, which in this scenario would mean the death benefits would be intended for the surviving family members, not the minor directly. This means the primary purpose of buying life insurance specifically on the child's life is not aligned with benefiting the child through an eventual payout of death benefits in the event of parental loss.