71. Upon the death of an insured individual, what does life insurance guarantee to deliver to the beneficiary?
Answer: C
Life insurance guarantees to deliver a specified sum of money to the beneficiary upon the death of the insured individual.
Life insurance policies are designed to provide financial protection by delivering a specified sum of money, known as the death benefit, to the beneficiary when the insured individual passes away.
A) An annuity.
An annuity is a financial product that provides regular payments over time, typically used for retirement income. Life insurance does not guarantee an annuity payment upon the death of the insured; rather, it offers a lump sum to the beneficiary.
B) A dividend.
Dividends are payments made to policyholders of certain types of insurance policies, typically whole life insurance, based on the insurer's financial performance. However, life insurance does not guarantee dividends to beneficiaries upon the death of the insured; it guarantees a death benefit instead.
C) A specified sum of money.
This option correctly identifies the primary purpose of life insurance, which is to provide a specified sum of money, or death benefit, to the beneficiary following the death of the insured individual. This amount is predetermined in the policy and is paid out tax-free to the beneficiary.
D) A final expense fund.
While some life insurance policies may be designed to cover final expenses, such as funeral costs, this is not a universal guarantee. Life insurance primarily guarantees a specified sum of money rather than a designated fund for final expenses.
Conclusion
The correct answer, a specified sum of money, highlights the fundamental function of life insurance as a financial safety net for beneficiaries after the insured's death. Options A, B, and D do not align with the core purpose of life insurance, making them incorrect in this context. Thus, C is the only choice that accurately describes the guarantee provided by life insurance.