Term

Lesson

Term life insurance is a type of life insurance policy that provides coverage for a specified term, typically ranging from 1 to 30 years. If the insured dies during the term, the beneficiaries pay the death benefit. If the insured survives the term, the policy expires with no cash value. Term life insurance is generally more affordable than permanent life insurance. It is often used to provide financial protection for specific needs, such as paying off a mortgage or funding a child's education.

Practice Question #1

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

A) Whole life insurance

B) Universal life insurance

C) Term life insurance

D) Variable life insurance

Select an option above to see an explanation here.

A) Whole life insurance is a type of permanent life insurance with a cash value component. B) Universal life insurance is a type of permanent life insurance with flexible premiums and adjustable death benefits. C) Term life insurance covers a specified term with no cash value. D) Variable life insurance is a type of permanent life insurance that allows the policyholder to invest the cash value in various investment options.

Terms

Term life insurance:: A life insurance policy covering a specified term, typically 1 to 30 years.
Death benefit:: The amount paid to beneficiaries upon the insured's death.

Practice Question #2

What is the primary purpose of a decreasing term life insurance policy?

A) To provide a level death benefit throughout the policy term

B) To cover a decreasing financial obligation, such as a mortgage

C) To accumulate cash value for the policyholder

D) To provide flexible premiums and adjustable death benefits

Select an option above to see an explanation here.

A) A level-term life insurance policy provides a level death benefit. B) A decreasing term life insurance policy is designed to cover a decreasing financial obligation, such as a mortgage. C) Term life insurance policies do not accumulate cash value. D) Flexible premiums and adjustable death benefits are features of universal life insurance.

Do Not Confuse With

Whole life insurance:: A type of permanent life insurance that covers the insured's entire life and includes a cash value component.
Universal life insurance:: A permanent life insurance that provides flexible premiums and adjustable death benefits.
Variable life insurance:: A type of permanent life insurance that allows the policyholder to invest the cash value in various investment options.
Indexed universal life insurance:: A type of permanent life insurance that credits interest based on the performance of a market index.

Practice Question #3

What is a key feature of a convertible term life insurance policy?

A) The ability to renew the policy at the end of the term without evidence of insurability

B) The ability to invest the cash value in various investment options

C) The ability to convert the policy to a permanent policy without evidence of insurability

D) The return of premiums paid if the insured survives the policy term

Select an option above to see an explanation here.

A) The ability to renew the policy at the end of the term without evidence of insurability is a feature of renewable term life insurance. B) Investing the cash value in various investment options is a feature of variable life insurance. C) Convertible term life insurance allows the policyholder to convert the policy to a permanent policy without evidence of insurability. D) The return of premiums paid if the insured survives the policy term is a feature of the return of premium term life insurance.

Historical Example

In the early 20th century, term life insurance gained popularity as a more affordable alternative to whole life insurance. This allowed more people to obtain life insurance coverage, providing financial protection for their families in the event of their death.

Practice Question #4

Become a Pro Member to see more questions

Example Series 65 Example Practice Question

Real-World Example

A young couple with a mortgage and two children may purchase a 20-year term life insurance policy to ensure that their mortgage can be paid off and their children's education funded if one of them were to pass away during the policy term.