Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceEasy
A client is 30 years old and wants to purchase a life insurance policy that offers the lowest initial premium and covers them for a specific period, after which they anticipate their financial obligations will decrease. Which type of policy best suits their needs?
- ATerm Life Insurance
- BVariable Life Insurance
- CWhole Life Insurance
- DUniversal Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: A. Term Life Insurance
Term life insurance provides coverage for a specific period at the lowest initial cost, making it suitable for temporary needs like covering a mortgage or raising children. It does not build cash value.
Why the other options are wrong
- B. Variable life insurance offers investment choices and cash value growth but comes with higher risk and premiums than term life.
- C. Whole life insurance provides lifetime coverage and builds cash value, resulting in higher initial premiums.
- D. Universal life insurance offers flexible premiums and adjustable death benefits but generally has higher costs than term life.
Term Life Insurance
Life insurance that provides coverage for a specific period (term) and pays a death benefit only if the insured dies during that term. It typically has no cash value.
- Covers a specific period (e.g., 10, 20, 30 years)
- Lowest initial premiums compared to permanent policies
- Does not build cash value
- Death benefit paid only if death occurs during the term
Memory trick: Temporary needs, lowest cost, term is best.