Rhode Island Life Insurance Practice Exam

What type of life insurance provides coverage for a specific period and pays benefits if the insured dies within that time frame?

1. Whole life insurance

2. Term life insurance

3. Universal life insurance

4. Variable life insurance

The correct answer is: Term life insurance

Term life insurance provides coverage for a specific period, typically ranging from one to thirty years, and pays out a death benefit to the beneficiaries if the insured dies within that timeframe. This type of policy is designed to offer protection during a crucial time, like raising children or paying off a mortgage, without the cash value component found in permanent policies such as whole life or universal life insurance. The simplicity and straightforward nature of term life insurance make it a popular choice among individuals seeking affordable, temporary coverage. Since it is strictly a death benefit policy, it does not accumulate cash value, unlike whole life or universal life insurance, which is why it generally has lower premiums. This option is ideal for those who want to ensure financial support for their dependents or to cover debts if they were to pass away unexpectedly during the specified period.