Which of the following is a characteristic of term life insurance?

Term life insurance is specifically designed to provide coverage for a predetermined period, which is why the correct answer emphasizes that it provides coverage for a specific period. This period can range from one year to several decades, depending on the policy. If the insured passes away during this term, the beneficiaries receive the death benefit. However, if the term expires and the insured is still alive, there is no payout, and the coverage simply ends unless renewed or converted to another type of insurance.

Unlike permanent life insurance policies, such as whole life, term life does not build cash value over time. This characteristic differentiates it from other types of life insurance that include an investment or savings component. While term life insurance can sometimes be renewable, it is not guaranteed to be so for all policies or terms. Additionally, term life insurance is generally more affordable compared to whole life insurance, as the latter includes a savings component and is designed to provide lifelong coverage. Thus, the key defining feature of term life insurance is its limited period of coverage.