Michigan Life Insurance Practice Exam

Term life insurance is the correct choice because it is designed to provide a death benefit to beneficiaries if the insured passes away within a specified term, such as 10, 20, or 30 years. This type of policy does not accumulate any cash value; its primary function is to offer financial protection for a set period. Once the term expires, the coverage ends unless the policyholder takes action to renew or convert it to a different policy.

Whole life insurance, on the other hand, provides a guaranteed death benefit and also builds cash value over time, which can be borrowed against or withdrawn. Universal life insurance similarly combines a death benefit with a savings component that builds cash value, allowing for flexible premium payments and death benefit amounts. Endowment insurance is a type of life insurance policy that pays out a benefit after a specified period or upon death, but it also typically has a cash value component. Therefore, the distinguishing feature of term life insurance is its focus solely on providing a death benefit without any cash value accumulation.