What defines term life insurance?

What defines term life insurance?

• A. Coverage for the entire lifetime of the insured
• B. Coverage for a specified period of time
• C. Policies with cash value accumulation
• D. Insurance that is only paid in dividends

Answer: (B)

Term life insurance is defined as coverage that is provided for a specified period of time, such as 10, 20, or 30 years. During this term, if the insured person passes away, the beneficiaries receive a death benefit. However, if the insured outlives the term, the coverage ends and there is no payout. This structure is straightforward and cost-effective compared to whole life or universal life insurance, which can cover a lifetime and often build cash value. In contrast, options that describe lifetime coverage or policies with cash value accumulation clearly do not align with term life insurance, as term policies do not include these features. Additionally, term life insurance does not operate on a dividend basis, which is typically associated with mutual life insurance policies rather than term policies. Hence, the defining characteristic of term life insurance is indeed its provision of coverage for a specific duration.

Term life insurance is defined as coverage that is provided for a specified period of time, such as 10, 20, or 30 years. During this term, if the insured person passes away, the beneficiaries receive a death benefit. However, if the insured outlives the term, the coverage ends and there is no payout. This structure is straightforward and cost-effective compared to whole life or universal life insurance, which can cover a lifetime and often build cash value.

In contrast, options that describe lifetime coverage or policies with cash value accumulation clearly do not align with term life insurance, as term policies do not include these features. Additionally, term life insurance does not operate on a dividend basis, which is typically associated with mutual life insurance policies rather than term policies. Hence, the defining characteristic of term life insurance is indeed its provision of coverage for a specific duration.