Which statement is true regarding term life insurance?

Which statement is true regarding term life insurance?

• A. It provides lifelong coverage as long as premiums are paid
• B. It pays a benefit only if the insured dies during the term of the policy
• C. It has a cash value component that grows over time
• D. It is always more expensive than permanent life insurance

Answer: (B)

Term life insurance is designed specifically to provide coverage for a set period of time, known as the "term." The statement that it pays a benefit only if the insured dies during the term of the policy is accurate. If the insured passes away within that specified term, the policy pays out the death benefit to the beneficiaries. If the insured survives beyond the term, the policy typically expires, and no benefit is paid out. In contrast, term life insurance does not offer lifelong coverage—this characteristic is more aligned with permanent life insurance, which remains in force as long as premiums are paid. Additionally, unlike permanent policies, term life insurance does not build cash value over time. It is generally less expensive than permanent life insurance, especially when comparing similar coverage amounts at younger ages. Understanding these distinctions is crucial for evaluating the suitability of term life insurance for individual financial needs.

Term life insurance is designed specifically to provide coverage for a set period of time, known as the "term." The statement that it pays a benefit only if the insured dies during the term of the policy is accurate. If the insured passes away within that specified term, the policy pays out the death benefit to the beneficiaries. If the insured survives beyond the term, the policy typically expires, and no benefit is paid out.

In contrast, term life insurance does not offer lifelong coverage—this characteristic is more aligned with permanent life insurance, which remains in force as long as premiums are paid. Additionally, unlike permanent policies, term life insurance does not build cash value over time. It is generally less expensive than permanent life insurance, especially when comparing similar coverage amounts at younger ages. Understanding these distinctions is crucial for evaluating the suitability of term life insurance for individual financial needs.