PSI Ohio Insurance Practice Exam

Which type of life insurance provides coverage for a specified period of time?

1. Whole life insurance

2. Universal life insurance

3. Term life insurance

4. Endowment insurance

The correct answer is: Term life insurance

Term life insurance is specifically designed to provide coverage for a predetermined period, typically ranging from one to thirty years. This type of policy is straightforward and focuses solely on the death benefit, meaning that if the insured passes away within the specified term, the beneficiaries receive the death benefit. If the term expires while the insured is still alive, no benefit is paid out, and the policy typically does not accumulate cash value. In contrast, whole life insurance offers lifetime coverage and includes a cash value component that grows over time. Universal life insurance operates similarly to whole life in that it provides lifelong coverage but also offers flexibility in terms of premiums and death benefits. Endowment insurance pays out a benefit either upon death during the policy term or, if the insured survives the term, at the end of the specified period. Thus, the defining characteristic of term life insurance is its limitation to a specified time frame for coverage, making it an ideal choice for individuals seeking temporary protection.