Which of the following describes the characteristics of a term life insurance policy?

Which of the following describes the characteristics of a term life insurance policy?

• A. Permanent coverage with investment component
• B. Coverage for a specified period with no cash value
• C. Lifetime coverage with accumulating cash value
• D. Coverage that can be converted at any time

Answer: (B)

A term life insurance policy is characterized by providing coverage for a specified period of time, such as 10, 20, or 30 years. Unlike permanent life insurance policies, term life does not accumulate cash value, meaning that it is purely a death benefit protection for the term of coverage. Once the term expires, the policyholder has the option to renew, convert, or let the coverage lapse, but there is no savings or investment component tied to the policy itself. This differentiates term life from permanent policies, which often combine a death benefit with a cash value that grows over time, providing additional financial flexibility and potential for growth. While term policies may offer a conversion option, the defining characteristic remains the limited duration of coverage without cash accumulation, making the selection of the correct answer vital to understanding the nature and purpose of term life insurance.

A term life insurance policy is characterized by providing coverage for a specified period of time, such as 10, 20, or 30 years. Unlike permanent life insurance policies, term life does not accumulate cash value, meaning that it is purely a death benefit protection for the term of coverage. Once the term expires, the policyholder has the option to renew, convert, or let the coverage lapse, but there is no savings or investment component tied to the policy itself.

This differentiates term life from permanent policies, which often combine a death benefit with a cash value that grows over time, providing additional financial flexibility and potential for growth. While term policies may offer a conversion option, the defining characteristic remains the limited duration of coverage without cash accumulation, making the selection of the correct answer vital to understanding the nature and purpose of term life insurance.