Which statement best describes a term policy?

Which statement best describes a term policy?

• A. The death benefit and premium remain constant for the term.
• B. The death benefit decreases over time.
• C. The policy accumulates cash value.
• D. The policy can be renewed without underwriting only after cash value is built.

Answer: (A)

Term life insurance provides temporary coverage with a level death benefit and level premiums for a specified period, and it does not build cash value. That’s why the description that the death benefit and premium remain constant for the term is the best fit. Since term policies don’t accumulate cash value, statements claiming cash value is built or that renewal depends on having cash value don’t apply. Also, a decreasing death benefit describes a different product (often called decreasing or reduced-term), not the standard term policy.

Term life insurance provides temporary coverage with a level death benefit and level premiums for a specified period, and it does not build cash value. That’s why the description that the death benefit and premium remain constant for the term is the best fit. Since term policies don’t accumulate cash value, statements claiming cash value is built or that renewal depends on having cash value don’t apply. Also, a decreasing death benefit describes a different product (often called decreasing or reduced-term), not the standard term policy.