Tennessee Insurance Practice Exam

What is one reason considered NOT valid for purchasing life insurance on a minor?

1. It funds a child trust

2. It provides a death benefit to the child if both parents die

3. It pays for college expenses

4. It covers burial costs

The correct answer is: It provides a death benefit to the child if both parents die

Purchasing life insurance on a minor can have several valid reasons, but providing a death benefit to the child if both parents die is not typically considered a valid reason. Life insurance is usually intended to provide financial protection and benefits to beneficiaries, often in the event of the insured's death. In the case of a minor, the primary concern tends to be about protecting the financial interests of the dependents (such as parents), rather than benefiting the minor directly. For example, options that involve establishing a child trust or ensuring there are funds for college expenses are focused on long-term financial planning and support for the child's future. Similarly, covering burial costs can help alleviate the financial burden on the family during a difficult time. These valid reasons align with the protective and financial planning purposes of life insurance. On the other hand, a death benefit intended for the child only arises if they are the insured individual. In scenarios where both parents are deceased, the focus generally shifts to the financial stability and care of the child, rather than providing a death benefit to the child themselves. The insurance policies for minors generally aim to support the family or other dependents financially rather than providing direct benefits to the child in such situations.