Rhode Island Life Insurance Practice Exam

Which term refers to the amount received by the beneficiary upon the death of the insured?

1. Face amount

2. Premium

3. Death benefit

4. Cash value

The correct answer is: Death benefit

The term that refers to the amount received by the beneficiary upon the death of the insured is known as the death benefit. This is a key concept in life insurance, where the primary purpose of the policy is to provide financial support to the beneficiaries after the insured's passing. The death benefit is outlined in the policy and is typically equal to the face amount of the policy, which indicates the maximum payout. Understanding the role of the death benefit is crucial for policyholders and beneficiaries, as it ensures that family members or dependents receive the intended financial support during a difficult time. It serves as reassurance for those who take out life insurance policies, knowing that their loved ones will have financial security if something were to happen to them. Other terms like face amount, premium, and cash value serve different functions within a life insurance context. The face amount is the stated sum in the policy, the premium refers to the amount paid for the policy, and cash value indicates the savings component within certain types of permanent life insurance. Only the death benefit directly addresses the payout aspect upon the insured's death, making it the correct term in this scenario.