Future Business Leaders of America (FBLA) Personal Finance Practice Test

What is the insurance called that pays out upon the policyholder's death?

1. Health Insurance

2. Disability Insurance

3. Life Insurance

4. Property Insurance

The correct answer is: Life Insurance

The insurance that pays out upon the policyholder's death is known as life insurance. This type of policy is designed to provide financial support to the beneficiaries of the deceased, helping them cover expenses such as funeral costs, outstanding debts, and living expenses. Life insurance can offer a sense of security for families by ensuring that they are financially protected in the event of an untimely death. Health insurance, on the other hand, focuses on covering medical expenses and providing access to healthcare services during the policyholder's lifetime, rather than financial benefits upon death. Disability insurance provides income replacement if the policyholder is unable to work due to illness or injury, while property insurance protects physical assets like homes and vehicles from damage or loss. Each of these types serves a different purpose and does not specifically address the financial implications of a policyholder's death, which is the primary function of life insurance.