Massachusetts Life Producer Practice Exam

Which of the following is commonly considered a need for life insurance?

1. Funding a vacation

2. Paying off mortgage debt

3. Investing in stocks

4. Saving for a child's college education

The correct answer is: Paying off mortgage debt

Paying off mortgage debt is commonly considered a significant need for life insurance because it directly impacts the financial security of a family. Life insurance can ensure that, in the event of the policyholder's death, the mortgage is paid off, relieving the surviving family members from the burden of maintaining mortgage payments during a challenging time. This helps protect the family's home and maintains their standard of living. In contrast, funding a vacation, investing in stocks, and saving for a child's college education are discretionary financial goals rather than essential needs. While they may be important to individuals, they do not directly address the immediate financial obligations or legacy concerns typically associated with the primary reasons for obtaining life insurance. Life insurance is primarily designed to provide financial support to dependents and cover essential liabilities, making mortgage debt a key consideration in its necessity.