PSI Ohio Insurance Practice Exam

Which of the following is a common feature of term life insurance policies?

1. Cash value accumulation

2. Flexible premium payments

3. Coverage only for a specified period

4. Guaranteed renewability

The correct answer is: Coverage only for a specified period

A common feature of term life insurance policies is that they provide coverage only for a specified period. This means that the insurance protection is in place for a predetermined time frame, which can often range from one year to several decades, depending on the policy selected. If the insured passes away during this term, the beneficiaries receive the death benefit; however, if the term expires and the insured is still alive, the coverage ends, and there is typically no payout or accumulation of value. This feature distinguishes term life insurance from whole or universal life policies, which include benefits like cash value accumulation and often have a permanent coverage aspect. Policies with flexible premium payments are more common in permanent life insurance, as term policies usually have fixed premium structures for the duration of the term. While some term policies offer guaranteed renewability, meaning they can be renewed without additional health assessments at the end of the term, this is not a universal characteristic of all term life policies. Therefore, the definitive aspect of term life is its limited duration of coverage.