Connecticut Life Producer Practice exam

Which of the following is a common personal use of life insurance?

1. Providing retirement income

2. Tax advantage for investment purposes

3. Survivor protection and estate creation

4. Reducing income tax liability

The correct answer is: Survivor protection and estate creation

Survivor protection and estate creation is a fundamental purpose of life insurance, which is why this option is correct. Life insurance is primarily designed to provide financial security to beneficiaries in the event of the policyholder's death. This ensures that loved ones can maintain their standard of living, cover debts, or fund future expenses, such as children's education. Additionally, life insurance can play a critical role in estate planning by providing the necessary liquidity to cover estate taxes or other financial obligations, thereby preserving the deceased's estate for heirs. While providing retirement income, utilizing tax advantages for investment, and reducing income tax liability are also potential uses of life insurance products, these do not capture the primary personal use of life insurance in a straightforward context. Survivor protection is the most essential and common reason individuals purchase life insurance, as it directly addresses the financial impact of a sudden loss on one's family.