Rhode Island Life Insurance Practice Exam

What type of life insurance policy provides coverage for a specific period of time?

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 is designed to provide coverage for a specified period, commonly ranging from one to thirty years. This type of policy pays a death benefit if the insured dies during that designated term. If the insured outlives the term, the policy simply expires, and there is no payout or accumulated cash value. This makes term life insurance a straightforward and affordable option for individuals looking to secure financial protection for their beneficiaries during a critical period, such as raising children or paying off a mortgage. In contrast, whole life insurance offers lifelong coverage and includes a cash value component that grows over time. Universal life insurance also provides lifelong coverage but allows for flexible premium payments and adjustable death benefits. Variable life insurance features investment components, where the cash value can fluctuate based on the performance of underlying investments. These options do not align with the concept of providing coverage strictly for a defined time period as term life insurance does.