South Carolina Life and Health Practice Exam

Which type of life insurance provides coverage for a specified term?

1. Universal life insurance

2. Term life insurance

3. Whole life insurance

4. Variable life insurance

The correct answer is: Term life insurance

Term life insurance provides coverage for a specified period, typically ranging from one year to 30 years. Policyholders choose the duration they want coverage for, and if the insured individual passes away during that term, the beneficiaries receive the death benefit. If the term expires and the policyholder is still alive, the coverage ends unless renewed or converted to a permanent policy. In contrast, universal life insurance is a form of permanent life insurance that offers flexible premiums and a cash value component. Whole life insurance also falls under the category of permanent insurance, providing lifetime coverage and a guaranteed death benefit along with cash value accumulation. Variable life insurance combines life insurance coverage with investment options, allowing the policyholder to allocate cash value to various investment vehicles, thus exposing the policy to market risks. In summary, term life insurance is distinctly characterized by its focus on a specific time frame for coverage, making it the correct choice for this question.