Which statement about term life insurance is true?

Which statement about term life insurance is true?

• A. It does not build cash value
• B. It provides lifetime coverage with level premiums
• C. It builds cash value over time
• D. It has tax advantages

Answer: (A)

Term life insurance is designed to provide pure protection for a set period. It does not accumulate any cash value, so there is no cash value to borrow or withdraw. Premiums are usually level for the term, but coverage ends when the term expires unless you renew or convert, and there’s no cash value built up. That makes the statement about not building cash value true. In contrast, permanent policies like whole life provide lifetime coverage and do build cash value over time, which is why descriptions claiming lifetime coverage with level premiums or cash value growth don’t apply to term. While life insurance benefits are generally paid income-tax-free to beneficiaries, that isn’t the feature that distinguishes term from permanent policies.

Term life insurance is designed to provide pure protection for a set period. It does not accumulate any cash value, so there is no cash value to borrow or withdraw. Premiums are usually level for the term, but coverage ends when the term expires unless you renew or convert, and there’s no cash value built up. That makes the statement about not building cash value true. In contrast, permanent policies like whole life provide lifetime coverage and do build cash value over time, which is why descriptions claiming lifetime coverage with level premiums or cash value growth don’t apply to term. While life insurance benefits are generally paid income-tax-free to beneficiaries, that isn’t the feature that distinguishes term from permanent policies.