Virginia State Life, Health and Annuities Practice Exam

Term life insurance is designed to provide coverage for a specified period, such as 10, 20, or 30 years, and its primary purpose is to pay a death benefit to beneficiaries if the insured passes away during that time frame. One of the key features of term life insurance is that it does not build cash value over time. Once the term expires, the coverage ends without any payout or benefit beyond the death benefit itself.

In contrast, whole life, universal life, and variable life insurance policies all include a cash value component. These types accumulate cash value, which policyholders can access through loans or withdrawals. Whole life insurance typically has a guaranteed cash value that grows at a set rate, universal life allows for flexible premiums and interest rates on cash value, and variable life permits the cash value to be invested in various options, potentially increasing its growth based on market performance.

Understanding the lack of a cash value component in term life insurance helps clarify the nature of temporary coverage and how it differs from permanent life insurance products. This distinction is crucial when evaluating options for life insurance based on needs, financial goals, and long-term planning.