Washington State Insurance Practice Exam

Which of the following best describes term life insurance?

1. Insurance that lasts for a lifetime

2. Insurance that provides coverage for a specified period

3. Insurance that builds cash value over time

4. Insurance that only covers accidents

The correct answer is: Insurance that provides coverage for a specified period

Term life insurance is best described as insurance that provides coverage for a specified period. This means that the policyholder chooses a term length, such as 10, 20, or 30 years, during which the insurance policy remains in effect. If the insured passes away during that term, the policy pays a death benefit to the beneficiaries. If the term expires and the individual is still alive, the coverage ends, and there are typically no benefits paid out unless the policy is renewed. Unlike whole life or universal life insurance policies, term life insurance does not accumulate cash value over time. It is designed to provide a straightforward death benefit without the additional savings or investment component that can come with permanent life insurance options. Additionally, term life does not cover accidents specifically; it provides coverage for death due to various causes, depending on the policy terms. By understanding that term life insurance is a temporary, fixed-duration product, individuals can make informed decisions about their life insurance needs according to their financial goals and situations.