PSI Life Exam Practice Test

Upon the death of an insured individual, what does life insurance guarantee to deliver to the beneficiary?

1. a specified sum of money

2. monthly payments for life

3. the original premium paid

4. the total accumulated cash value

The correct answer is: a specified sum of money

Life insurance is designed to provide financial support to beneficiaries upon the death of the insured individual. The guaranteed benefit is a specified sum of money, known as the death benefit. This sum is predetermined when the insurance policy is issued and is based on the coverage amount chosen by the policyholder. When the insured passes away, the insurance company pays out this specified amount to the beneficiaries, regardless of the premiums paid or the cash value of the policy, if applicable. This structure provides financial security to the beneficiaries during a time of loss, allowing them to cover expenses such as funeral costs, debt repayment, and ongoing living expenses. Options that suggest monthly payments for life, the original premium paid, or the total accumulated cash value do not align with the primary function of life insurance policies, which is to deliver a lump-sum benefit upon death. While some life insurance policies may offer options like cash value accumulation or annuity features, the basic guarantee remains the predetermined sum agreed upon at the policy's inception.