Texas General Lines — Life, Accident, Health and HMOGeneral InsuranceMedium
A life insurance policy states that the insurer will pay the death benefit to the beneficiary if the insured dies within a specified period, typically until age 65 or 70. If the insured is still alive at the end of this period, the policy terminates with no value. What type of policy is being described?
- AUniversal Life Insurance
- BWhole Life Insurance
- CTerm Life Insurance
- DEndowment Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: C. Term Life Insurance
Term life insurance provides coverage for a specific period, and if the insured outlives that period, the policy expires without value. Whole life and universal life policies have cash value and permanent coverage, while endowment policies pay out if the insured is alive at the end of the term.
Why the other options are wrong
- A. Universal life is a flexible premium, permanent policy with a cash value component.
- B. Whole life provides permanent coverage and builds cash value.
- D. Endowment policies pay out the face amount if the insured is alive at the end of the term.
Term Life Insurance
Life insurance that provides coverage for a specific period (term) and pays a death benefit only if the insured dies within that term.
- Coverage for a defined period.
- No cash value accumulation.
- Policy terminates if insured outlives the term.
Memory trick: Think of a 'TERM' paper – it has a deadline, and then it's over.