South Carolina Life Insurance Practice Exam

In a life insurance policy, what does the term "beneficiary" refer to?

1. The person who pays the premiums

2. The person who receives the death benefit

3. The insurance company

4. The agent selling the policy

The correct answer is: The person who receives the death benefit

The term "beneficiary" in a life insurance policy specifically refers to the individual or entity designated to receive the death benefit proceeds upon the death of the insured person. This designation is a critical aspect of life insurance, as it ensures that the financial support intended for beneficiaries, such as family members or other dependents, is provided in the event of the policyholder’s death. A beneficiary can be a person, a group of people, an organization, or even a trust, depending on the policyholder's wishes. The designation of a beneficiary allows the policyholder to decide who will receive the financial benefit, ensuring that their loved ones or chosen beneficiaries are financially secure after their passing. This term is essential for understanding how life insurance works, emphasizing the purpose of the policy as a means to provide for others in a time of need.