South Carolina Insurance Practice Exam

Which of the following types of policy does not build cash value?

1. Whole Life

2. Universal Life

3. Term

4. Variable Life

The correct answer is: Term

Term life insurance is designed primarily to provide death benefit protection for a specified period, such as 10, 20, or 30 years. Unlike whole life, universal life, and variable life policies, term life does not accumulate cash value over time. The focus of term insurance is on offering a straightforward and typically more affordable life insurance option for individuals who want to ensure financial protection for their beneficiaries without the additional component of cash accumulation. Whole life, universal life, and variable life insurance all have a cash value component, which accumulates over time based on premiums paid and, in some cases, investment performance. In contrast, once a term life policy expires, it provides no cash value or benefits if the insured does not pass away during the coverage period. This characteristic makes term life insurance distinctive among the options provided, solidifying its role as a temporary solution for life insurance needs without the benefits associated with cash value accumulation.