Washington Life Producer Practice Exam

Which of the following best describes the face amount of a life insurance policy?

1. The initial cash value of the policy

2. The amount payable upon the insured's death

3. The total premiums paid over the life of the policy

4. The bonus amount added each year to the policy

The correct answer is: The amount payable upon the insured's death

The face amount of a life insurance policy is best described as the amount payable upon the insured's death. This is the predetermined sum that the insurance company agrees to pay to the beneficiaries when the insured passes away, assuming the policy is in force and all conditions are met. This amount is specified in the policy document and is a central feature of life insurance, as it represents the primary benefit for which the policyholder pays premiums. Understanding the face amount is crucial for those involved in life insurance as it highlights the main objective of the policy: providing financial protection for the insured's beneficiaries. This clarity helps policyholders and their families plan for the financial implications of the insured's death, making it a pivotal aspect of life insurance planning. In contrast, other options represent different concepts related to life insurance but do not define the face amount. For example, initial cash value refers to the monetary value of a permanent life insurance policy accessible while the policy is active, but it is not synonymous with the face amount. Similarly, total premiums paid reflect the lifetime financial contribution made by the policyholder, and the bonus amount added each year relates to policies that may accrue dividends or interest, neither of which define the direct death benefit of the policy.