What defines a term life insurance policy?

A term life insurance policy is characterized by providing coverage for a specified period, such as 10, 20, or 30 years. During this time, if the insured passes away, the policy pays a death benefit to the beneficiaries. The emphasis on a defined term is crucial to understanding how term life insurance operates, as it does not accumulate cash value over time and has no connection to lifetime coverage. Term policies are designed to offer affordable premiums for a set period, making them an attractive option for individuals looking for temporary financial protection.

The other options describe features not associated with term life insurance. Lifetime coverage, as mentioned in the first option, pertains more closely to permanent life insurance policies. Cash value accumulation, portrayed in the second option, is a characteristic of whole life or universal life insurance, which build cash value that can be accessed by the policyholder. Lastly, dividends, as noted in the fourth option, are typically associated with participating whole life policies, which can return a portion of the premium to policyholders. Therefore, the defining feature of term life insurance is accurately capturing the essence of its limited time frame of coverage.