South Carolina Life and Health Practice Exam

Which of the following policies does NOT build cash value?

1. Whole life insurance

2. Universal life insurance

3. Term life insurance

4. Variable life insurance

The correct answer is: Term life insurance

Term life insurance is designed primarily to provide a death benefit for a specified period, typically without any cash value accumulation. The purpose of term life is to offer financial protection to beneficiaries in case of the policyholder's death during the designated time frame, such as 10, 20, or 30 years. Since it does not involve investment features or savings components, there is no cash value that builds over time. In contrast, whole life insurance, universal life insurance, and variable life insurance all include a cash value component. Whole life policies build guaranteed cash value at a steady rate, universal life offers flexible premiums and can accumulate cash value based on interest rates, and variable life provides potential cash value growth linked to investment performance, albeit with more risk involved. Understanding the various characteristics of these policies helps clarify why only term life does not contribute to cash value accumulation.