Tennessee Insurance Practice Exam

What is the primary feature of term life insurance?

1. It provides coverage for the insured's entire life

2. It gives the greatest amount of coverage for a limited period of time

3. It accumulates cash value over time

4. It can be converted to universal life without restrictions

The correct answer is: It gives the greatest amount of coverage for a limited period of time

The primary feature of term life insurance is that it provides the greatest amount of coverage for a limited period of time. This type of insurance is designed to offer protection against the risk of death for a specified term, which is typically anywhere from one year to thirty years. During this time, if the insured passes away, beneficiaries receive the full face value of the policy. It is particularly appealing to individuals seeking affordable premiums for a higher coverage amount, especially during significant life stages such as raising a family or paying off a mortgage. Unlike other forms of life insurance, such as whole life or universal life, term life does not accumulate cash value. This means it is generally less expensive, as it focuses solely on providing a death benefit rather than an investment component. The limited duration of term policies means that once the term ends, coverage ceases unless the policyholder opts to renew or convert it, often at a higher cost due to advancing age or changes in health status.