South Carolina Life Insurance Practice Exam

What type of life insurance provides coverage for a specified term and has no cash value?

1. Whole Life

2. Term Life

3. Universal Life

4. Variable Life

The correct answer is: Term Life

Term life insurance provides coverage for a specified period, often ranging from one to thirty years, depending on the policyholder’s needs. One of the defining characteristics of term life insurance is that it offers pure death benefit protection without any savings component or cash value accumulation. This means that if the insured passes away during the term of the policy, the beneficiaries receive the death benefit. However, if the term expires while the insured is still alive, there is no payout or cash value that can be accessed. In contrast, options like whole life and universal life insurance do include a cash value component, allowing the policyholder to accumulate savings over time. Variable life insurance also features a cash value, which is tied to investment performance. These attributes distinguish term life insurance as a straightforward, cost-effective option for individuals primarily seeking financial protection for a set duration without the intent of accumulating wealth through the policy. Therefore, term life insurance is best suited for those looking for a simple and affordable way to secure life insurance coverage for a specific timeframe.