Rhode Island Life Insurance Practice Exam

Which of the following is NOT a common feature of permanent life insurance?

1. Level premiums

2. Coverage for a limited term

3. Cash value accumulation

4. Lifetime coverage

The correct answer is: Coverage for a limited term

Permanent life insurance is designed to provide coverage for the insured's entire life, as long as premiums are paid, and includes several key features that distinguish it from term life insurance, which only offers coverage for a specified period. Coverage for a limited term is characteristic of term life insurance, which expires after a designated timeframe (like 10, 20, or 30 years), providing no death benefit or cash value if the insured outlives the term. In contrast, permanent life insurance remains in force for the lifetime of the insured, accumulating cash value over time and offering a guarantee of death benefit as long as the policy is maintained. The other features of permanent life insurance include level premiums, which remain consistent throughout the life of the policy; cash value accumulation, where the policy builds a savings component that can be accessed during the insured's lifetime; and lifetime coverage, ensuring that the policy remains effective until death, rather than terminating after a set period. These attributes collectively affirm the enduring nature and financial benefits of permanent life insurance, underscoring why coverage for a limited term does not align with its characteristics.