Chartered Life Underwriter Practice Exam 2025 - Free CLU Practice Questions and Study Guide

Term insurance is primarily designed to provide protection for a specified period, known as the term of the policy, and one of its most significant advantages is the lower initial premiums compared to permanent life insurance products such as whole life or universal life insurance. This affordability makes term insurance attractive, especially for individuals and families seeking high coverage amounts without incurring significant ongoing costs.

The lower initial premiums allow policyholders to secure a larger death benefit for a more economical price, which can provide financial security for dependents during crucial years, such as when children are still in school or when debts are at their peak. However, over time, as the term expires, the policy may not provide a cash value component or flexibility in contributions like other types of insurance.

In contrast, the options that mention borrowing against the policy, guaranteed cash value, or flexible premium payments are typically features associated with permanent life insurance policies. These attributes are compelling reasons some individuals might choose permanent products, but they do not apply to term insurance in the same way, reinforcing the unique benefit of lower initial premiums that term life provides.