South Carolina Life Insurance Practice Exam

What characteristic defines term life insurance?

1. Permanent coverage

2. Investment component

3. Pure death benefit only

4. Cumulative cash value

The correct answer is: Pure death benefit only

Term life insurance is characterized primarily by providing a pure death benefit, which means that it pays out a predetermined amount of money to the beneficiaries upon the insured's death within the policy term, as long as the premiums are paid. This type of insurance is designed solely to provide financial support to the insured's loved ones in the event of their untimely death during the coverage period. Unlike permanent life insurance, term life does not accumulate any cash value over time; it is strictly a risk management tool without an investment component. The absence of both cash value accumulation and permanent coverage means that term life insurance is generally more affordable and straightforward compared to other life insurance products. Its primary purpose is to provide financial security to beneficiaries without the added features or expenses associated with permanent policies.