PSI Ohio Insurance Practice Exam

What is a common characteristic of term life insurance?

1. It builds cash value over time.

2. It provides coverage for a specific period of time.

3. It is more expensive than whole life insurance.

4. It requires medical exams for all applicants.

The correct answer is: It provides coverage for a specific period of time.

A defining feature of term life insurance is that it offers coverage for a specific period, typically ranging from one year to 30 years. This means that the policyholder is insured for that designated timeframe, and if the insured passes away during this term, their beneficiaries receive the death benefit. If the term expires and the individual is still alive, the coverage ends unless the policy is renewed or converted to a permanent policy. In contrast, cash value components are associated with permanent life insurance policies, not term life policies. Additionally, term life insurance is usually more affordable than whole life insurance because it does not include savings or investment components. While some term policies may require medical exams, many are available without undergoing such screenings, particularly lower coverage amounts or policies guaranteed to issue. Thus, the focus of term life insurance is solely on providing a death benefit for a set time period, highlighting why that characteristic is central to understanding this type of insurance.