AD Banker Comprehensive Practice Exam

The main purpose of a life insurance policy is to:

1. Provide a savings option

2. Ensure financial protection for beneficiaries upon the policyholder's death

3. Maximize investment returns

4. Accumulate cash value

The correct answer is: Ensure financial protection for beneficiaries upon the policyholder's death

The primary objective of a life insurance policy is to ensure financial protection for beneficiaries upon the policyholder's death. This means that when the insured person passes away, the policy pays out a death benefit to designated beneficiaries, providing them with financial stability during a difficult time. The death benefit can help cover expenses such as funeral costs, debts, and living expenses, making it a critical tool for financial planning and security. While certain life insurance products may offer cash value accumulation or investment components, these features are secondary to the main purpose of providing a death benefit. The fundamental function of life insurance is to mitigate the financial repercussions of an untimely death for those left behind. This focus on beneficiary protection distinguishes life insurance from investment or savings products, which primarily aim at growing wealth or accumulating savings.