PSI Ohio Insurance Practice Exam

Which of the following insurance policies provides coverage for a fixed period with no cash value?

1. Term life insurance.

2. Whole life insurance.

3. Indexed universal life insurance.

4. Variable universal life insurance.

The correct answer is: Term life insurance.

Term life insurance provides coverage for a specified period, such as 10, 20, or 30 years, and is designed to pay a death benefit if the insured passes away within that time frame. One of the key characteristics of term life insurance is that it does not build cash value over time like whole life or other permanent insurance policies. Instead, it is purely a risk protection product, meaning that it covers the financial risk of death during the term, and when the term ends, the coverage ceases unless renewed or converted to a permanent policy, usually at a higher premium. In contrast, whole life, indexed universal life, and variable universal life insurance policies all include a cash value component that grows over time, allowing policyholders to borrow against or cash in the policy. These features differentiate them heavily from term life insurance, which is why it is the correct answer in this case.