Primerica Life Producer Practice Test

What is a characteristic of a term life insurance policy?

1. It builds cash value over time

2. It provides coverage for a specified duration

3. It is the most expensive type of life insurance

4. It is always convertible to whole life insurance

The correct answer is: It provides coverage for a specified duration

A term life insurance policy is characterized primarily by the fact that it provides coverage for a specified duration. This means that the insurance coverage is only in effect for a certain period, which can be 10, 20, or even 30 years, depending on the policy. If the insured passes away during this term, the beneficiaries receive the death benefit. However, if the insured outlives the term, the coverage expires, and no benefit is paid out. This feature of having a defined term helps keep premiums lower compared to other types of life insurance, such as whole life, which is designed to provide coverage for the insured's lifetime and typically builds cash value. The other options do not accurately describe the nature of term life insurance: it does not build cash value, it is generally more affordable than permanent life insurance, and while some term policies may offer a convertibility option, it is not a universal characteristic of all term policies.