Why would Alesandra need less life insurance if Luis passes away prematurely before her?

Why would Alesandra need less life insurance if Luis passes away prematurely before her?

• A. Alesandra has higher income, and therefore a higher Social Security benefits
• B. Luis's death would reduce overall insurance premiums
• C. Alesandra's life expectancy increases
• D. The survivor would receive no benefits anyway

Answer: (B)

When thinking about life insurance needs, you focus on replacing income and covering financial obligations after a death. If Luis dies, the risk that the policy would need to pay out for him is gone, so the policy on his life would end and you’d stop paying premiums for that coverage. That reduction in the insured risk directly lowers overall insurance premiums, which is why this choice is correct. The other options don’t address the actual effect: Social Security or other benefits don’t automatically drive a need for less insurance on him, his own life expectancy wouldn’t change in a way that reduces the need, and it’s not true that the survivor would receive no benefits anyway.

When thinking about life insurance needs, you focus on replacing income and covering financial obligations after a death. If Luis dies, the risk that the policy would need to pay out for him is gone, so the policy on his life would end and you’d stop paying premiums for that coverage. That reduction in the insured risk directly lowers overall insurance premiums, which is why this choice is correct. The other options don’t address the actual effect: Social Security or other benefits don’t automatically drive a need for less insurance on him, his own life expectancy wouldn’t change in a way that reduces the need, and it’s not true that the survivor would receive no benefits anyway.