South Carolina Life Insurance Practice Exam

Which type of life insurance provides coverage for a specific period of time?

1. Whole Life Insurance

2. Term Life Insurance

3. Universal Life Insurance

4. Variable Life Insurance

The correct answer is: Term Life Insurance

Term life insurance is designed to provide coverage for a specifically defined period, such as 10, 20, or 30 years. During this time frame, the insured is protected, and if they pass away, the beneficiaries receive the death benefit. This type of insurance is straightforward and typically offers lower premiums compared to permanent life insurance options, as it does not build cash value and is only in place for the duration of the term. For individuals seeking coverage that aligns with temporary needs—like covering a mortgage or providing for dependents until they become independent—term life insurance serves as an appropriate solution. It's essential to understand that, unlike whole life or universal life policies, term insurance does not offer lifetime coverage or an investment component, which is a crucial distinction. Whole life, universal life, and variable life insurances provide coverage for the insured's entire life (as long as premiums are paid) and often include savings or investment components, which differentiates them from the purely term-based structure of term life insurance.