Life & Health Insurance Exam (National Portion)Life InsuranceMedium
A life insurance policy states that the insurer will pay the death benefit to the designated beneficiary, but only if the insured dies before reaching age 65. If the insured lives past age 65, the policy terminates, and no death benefit is paid. Which type of policy does this describe?
- ATerm Life
- BWhole Life
- CEndowment
- DUniversal Life
Show answer & explanationAnswer & explanation
Correct answer: A. Term Life
This describes a Term Life policy, which provides coverage for a specific period (e.g., until age 65). If the insured dies within that term, the death benefit is paid. If they live beyond the term, coverage ends, and no benefit is paid.
Why the other options are wrong
- B. Whole Life policies provide permanent coverage and pay a death benefit regardless of when the insured dies (as long as premiums are paid).
- C. Endowment policies pay a death benefit if the insured dies within a specified term, or pay the face amount to the policyowner if the insured is still alive at the end of the term.
- D. Universal Life policies are flexible premium, adjustable death benefit policies that provide permanent coverage, not coverage that ends at a specific age without a payout.
Term Life Insurance
Life insurance that provides coverage for a specific period (the 'term'). If the insured dies within the term, a death benefit is paid. If they outlive the term, coverage ends without a payout.
- Provides temporary coverage.
- No cash value accumulation.
- Least expensive type of life insurance.
- Often convertible to permanent insurance.
Memory trick: TERM = TEMPORARY, like a lease on an apartment.