FBLA Insurance & Risk Management Practice Test 2025 - Free Insurance & Risk Management Practice Questions and Study Guide

When the insured individual passes away, the primary function of a life insurance policy is to provide financial support to the beneficiaries named in the policy. The correct response reflects this essential purpose of life insurance, where the beneficiary is entitled to receive a predetermined sum, known as the death benefit. This payout serves to assist the beneficiaries in covering expenses such as funeral costs, outstanding debts, and ongoing living expenses, ensuring financial stability during a challenging time.

The other possible answers do not align with standard life insurance practices. For instance, a life insurance policy does not become void upon the insured's death; instead, it is designed to activate the payout process. Refunding premium payments is not customary after the death of the insured, as the death benefit is prioritized. Moreover, while rights related to the policy may change, they do not simply revert to the insurance company following the insured's death; rather, the policy's provisions dictate that the benefit is provided to the designated beneficiaries. Thus, the established role of the beneficiary receiving a specified amount is a fundamental aspect of life insurance, confirming that this option is indeed correct.