One benefit of life insurance policy is that it serves as?

A. replacement of earnings after injuries
B. provision for bad debts
C. collateral for loans
D. repair cost of damaged properties

Correct Answer: Option A

A. replacement of earnings after injuries

Explanation

Life insurance provides an infusion of cash for dealing with the adverse financial consequences of the insured’s death. Life insurance enjoys favorable tax treatment, unlike any other financial instrument. Death benefits are generally income-tax-free to the beneficiary.

The purpose of life insurance is to provide financial protection to surviving dependents after the death of an insured.