South Carolina Life Insurance Practice Exam

What type of insurance covers the risk of premature death?

1. Disability insurance

2. Term life insurance

3. Health insurance

4. Long-term care insurance

The correct answer is: Term life insurance

Term life insurance is specifically designed to cover the risk of premature death. This type of insurance provides a death benefit to the beneficiaries if the insured individual passes away within a specified period, known as the term. The primary purpose of term life insurance is to offer financial protection for dependents or beneficiaries by providing a lump-sum payment, which can assist in covering expenses like funeral costs, mortgage payments, and other financial obligations. Disability insurance is intended to replace income, should the insured become unable to work due to a disability, while health insurance focuses on covering medical expenses related to illness or injury. Long-term care insurance is structured to provide assistance for individuals who are unable to perform daily activities due to chronic illness or disability, usually after a certain age. Each of these types serves different purposes and addresses various financial risks and needs, but term life insurance is uniquely focused on the financial implications of an individual's premature death.