Washington Life Producer Practice Exam

What is generally NOT a characteristic of term life insurance?

1. It provides a death benefit for a specified term

2. It accumulates cash value over time

3. It may be renewable at the end of the term

4. It generally has lower premiums than whole life insurance

The correct answer is: It accumulates cash value over time

Term life insurance is designed to provide coverage for a specified period, known as the "term." One key characteristic of term life insurance is that it does not accumulate cash value over time. Unlike whole life insurance, which incorporates a savings element allowing policyholders to build cash value that can be accessed or borrowed against, term life insurance only offers a death benefit if the insured passes away within the term. The absence of a cash value component is fundamental to how term life operates; it focuses solely on providing financial protection for the beneficiaries during the term of the policy and, therefore, is typically more affordable. This feature makes term life insurance an appealing option for those looking for straightforward coverage without the added complexity of cash value accumulation. The other characteristics mentioned, such as providing a death benefit for a specified term, being potentially renewable, and generally having lower premiums compared to whole life insurance, are indeed typical of term life policies. These points further highlight how term life is structured differently from other types of life insurance that do include cash value features.