Certified Financial Consultant (CFC) Practice Exam

What term refers to the monetary compensation paid to a beneficiary upon the death of an insured?

1. Dividends

2. Payout

3. Death benefit

4. Settlement amount

The correct answer is: Death benefit

The term that specifically refers to the monetary compensation paid to a beneficiary upon the death of an insured is "death benefit." This payment is a core component of life insurance policies, designed to provide financial support to the insured's beneficiaries in the event of the insured's demise. The death benefit can help cover various expenses, such as funeral costs, outstanding debts, or ongoing living expenses for the beneficiaries. Dividends are typically related to policyholder profits in mutual insurance companies and are not guaranteed payments upon death. Payout is a more general term that could refer to any type of payment, not specifically the death benefit. Similarly, settlement amount could pertain to the resolution of various financial claims and is not exclusive to life insurance. Thus, "death benefit" precisely identifies this compensatory payment within the context of life insurance.