Term insurance is a type of life insurance policy that provides coverage for a specified term or period of time, typically ranging from 10 to 30 years. It is important to understand the characteristics of term insurance to make an informed decision about purchasing this type of policy.

The correct characteristic of term insurance from the provided options is:

a. Expires at the end of the policy period

This is correct because term insurance is designed to provide coverage for a specific term, after which the policy expires. In other words, if the insured individual does not pass away during the term of the policy, there is no payout, and the coverage ends. This characteristic is what distinguishes term insurance from other types of life insurance policies.

Now, let’s discuss why the other options are not correct:

b. Builds cash value:

Term insurance, unlike certain other types of life insurance policies like whole life or universal life, does not accumulate cash value over time. Cash value is a savings component that grows within the policy. Which, allows the policyholder to potentially borrow against it or withdraw funds.

Term insurance is purely designed to provide a death benefit, and the premiums paid go entirely towards the cost of insurance coverage. As a result, it does not have a cash accumulation component.

c. Has nonforfeiture options:

Nonforfeiture options are typically associated with permanent life insurance policies, such as whole life or universal life. These options provide alternatives for policyholders who can no longer afford to pay premiums.

Nonforfeiture options might allow the policyholder to receive a reduced paid-up policy (with a lower death benefit but no more premiums due), extended term insurance (continuing the same death benefit for a specified period with no further premiums), or cash surrender value (a payout if the policy is surrendered before death).

Term insurance, being a temporary form of coverage, does not include these features because it is not meant to be retained for a policyholder’s entire lifetime.

d. Endows at the end of the policy period:

Endowment policies are a specific type of life insurance that pays out a lump sum either upon the insured’s death or when the policy matures at a specified date (endowment date). Term insurance, on the other hand, does not endow at the end of the policy period. In term insurance, if the insured individual survives the specified term, there is no payout.

The coverage simply expires, and the policyholder is not entitled to any benefits beyond the assurance that was provided during the term.

In conclusion, term insurance stands out as a distinct type of life insurance policy characterized by its simplicity and specific purpose. It is designed to provide coverage for a predetermined term, offering a death benefit to beneficiaries in the unfortunate event of the insured’s passing within that period.

Unlike other types of life insurance, such as whole life or universal life, term insurance does not accumulate cash value over time. This crucial distinction makes it a cost-effective choice for individuals seeking straightforward financial protection for a defined duration.