Which is true about a term life insurance policy?

Term life insurance is defined by its specific, limited duration of coverage. It provides a death benefit to the beneficiaries only if the insured dies within the specified "term" (e.g., 10, 20, or 30 years). This makes it a form of temporary protection, designed to cover needs for a finite period, such as during a mortgage or until children are financially independent. Unlike permanent insurance, it does not build equity or cash value, making it a pure protection product.

A. Term life insurance is characterized by its lack of a cash value component; this feature is central to permanent life insurance policies like whole life.

C. Term policies are commonly written for various durations, including popular terms of 10, 20, and 30 years, not just five years or less.

D. While many term policies are renewable, the premium increases at each renewal to reflect the insured's higher age and increased mortality risk.

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1. Black, K., Jr., & Skipper, H. D., Jr. (2000). Life and Health Insurance (13th ed.). Prentice Hall.

Page 99, Chapter 6, "Term Life Insurance": "Term life insurance provides protection against financial loss resulting from death during a specified period of time." (Supports Answer B).

Page 99, Chapter 6, "General Characteristics": "Term policies provide 'pure' protection... With few exceptions, they do not develop cash values." (Refutes Answer A).

Page 101, Chapter 6, "Renewable Term": "The premium rate for a renewable term policy increases at each renewal." (Refutes Answer D).

2. Vaughan, E. J., & Vaughan, T. M. (2014). Fundamentals of Risk and Insurance (11th ed.). John Wiley & Sons.

Chapter 19, "The Life Insurance Contract," Section: "Term Insurance": "Term insurance provides protection for a limited period... The most common term policies are for 5, 10, 15, 20, 25, or 30 years." (Supports Answer B, Refutes Answer C).

3. Virginia Cooperative Extension. (2021). Life Insurance: How It Works (Publication 354-143). Virginia Tech.

Page 2, "Types of Life Insurance," Section: "Term Insurance": "Term insurance provides coverage for a specific period of time... It does not build cash value." (Supports Answer B, Refutes Answer A).