PSI Ohio Insurance Practice Exam

Which type of life insurance provides coverage with no cash value accumulation?

1. Term life insurance

2. Whole life insurance

3. Universal life insurance

4. Variable life insurance

The correct answer is: Term life insurance

Term life insurance is the correct answer because it is specifically designed to provide coverage for a predetermined period, typically ranging from one to thirty years. It pays a death benefit to the beneficiary if the insured passes away during the term of the policy. Unlike whole life, universal life, or variable life insurance, term life does not build cash value over time. This is because term policies are primarily structured to provide pure life insurance protection, with no investment component or savings feature. In contrast, whole life insurance accumulates cash value as part of the policy, providing both a death benefit and an investment component that grows over time. Universal life insurance also includes a cash value element, which can be adjusted based on the policyholder's needs and market conditions. Variable life insurance allows policyholders to allocate cash value into various investment options, which can lead to fluctuations in cash value based on market performance. Hence, term life insurance remains the only type among these options that offers no cash value accumulation.