Life License Qualification Program (LLQP) Practice Exam

In which scenario would a family income policy be most beneficial?

1. To cover educational expenses

2. To provide income to family after death

3. To fund retirement

4. To pay off a mortgage

The correct answer is: To provide income to family after death

A family income policy is designed primarily to provide a steady stream of income to beneficiaries in the event of the policyholder's death. This type of policy combines elements of life insurance with income replacement, ensuring that the family continues to receive financial support during a critical period after the loss of the insured. The payout typically occurs for a specified number of years, thus allowing the family to maintain their standard of living without the pressure of an immediate financial crisis. In the context of the scenario provided, the benefit of a family income policy is most evident when the goal is to replace lost income and support the family during a difficult time. This solution addresses the financial stability of the dependents, helping to cover everyday expenses like housing, food, and other living costs that may arise after the death of a primary wage earner. The other scenarios—covering educational expenses, funding retirement, and paying off a mortgage—do not align with the primary purpose of a family income policy. While those are important financial considerations, they typically require different types of insurance products or financial planning strategies that specifically cater to those needs.