Tennessee Life Producer Practice Exam

What is typically the primary purpose of a life insurance policy?

1. Wealth accumulation

2. Protection against loss of income

3. Investment growth

4. Tax reduction

The correct answer is: Protection against loss of income

The primary purpose of a life insurance policy is to provide protection against loss of income due to the death of the insured. When an individual passes away, their life insurance benefits are typically paid out to the beneficiaries, offering financial support during a difficult time. This is particularly important for those with dependents, such as children or a spouse, who may rely on the deceased for financial stability. The death benefit can help cover everyday expenses, pay off debts, or fund future needs like education, ensuring that the beneficiaries maintain their standard of living despite the sudden loss. While there are additional benefits associated with life insurance policies, such as potential investment components or tax advantages, these are secondary considerations. The core function of life insurance is to provide financial security and peace of mind to the insured and their loved ones in the event of an unexpected death.