New York Child Abuse Identification and Reporting Practice Exam

What is the characteristic feature of a term life insurance policy?

1. Pays a benefit only during the specified term of the policy

2. Generates cash value over time

3. Provides coverage for the insured's lifetime

4. Always includes a critical illness rider

The correct answer is: Pays a benefit only during the specified term of the policy

A term life insurance policy is designed to provide coverage for a specific period, known as the "term." If the insured passes away during this term, the policy pays a death benefit to the beneficiaries. This characteristic of paying a benefit only during the specified term is fundamental to term life insurance and distinguishes it from other types of life insurance, such as whole life or universal life, which offer lifetime coverage and often accumulate cash value over time. In contrast, other options do not align with the nature of term life policies. Cash value generation is a feature of permanent life insurance policies, as they include investment components. Lifetime coverage is associated with whole life policies, offering lifelong protection as long as premiums are paid. A critical illness rider is an optional addition that may be included in some policies, but it is not a defining characteristic of term life insurance. Therefore, the focus on the defined duration of coverage is what makes option A the correct answer.