Utah Life Producer Practice Exam

What is the primary objective of life insurance?

1. To provide savings for retirement

2. To protect against financial loss at death

3. To invest in the stock market

4. To fund educational expenses

The correct answer is: To protect against financial loss at death

The primary objective of life insurance is to protect against financial loss at death. This type of insurance is designed to provide a financial safety net for the beneficiaries of the insured in the event of the policyholder's death. By doing so, life insurance ensures that dependents and loved ones are financially supported during a difficult time, particularly in covering expenses such as mortgage payments, living costs, and other debts. The key function of life insurance is risk management; it transfers the financial risk of death from the insured to the insurance company. While some life insurance policies may have cash value components or can be used as part of a broader financial planning strategy, the fundamental purpose remains focused on providing a death benefit to alleviate the financial burden that could arise from losing an income earner or primary financial provider. Other choices, such as providing savings for retirement, investing in the stock market, or funding educational expenses, might represent secondary benefits or uses of financial products but do not capture the essence of life insurance's primary function. These aspects are typically more related to other financial planning tools such as retirement accounts or educational savings plans.