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

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What is a common characteristic of term insurance policies?

They accumulate cash value over time

They are typically less expensive than whole life policies

Term insurance policies are often more affordable than whole life policies due to their structure and benefits. They provide coverage for a specific period, usually ranging from one year to several decades, without accumulating cash value. This lack of a cash value component allows term insurance to be offered at lower premiums compared to whole life insurance, which includes a savings element that grows over time.

Additionally, term insurance is straightforward and primarily focuses on providing death benefit protection for a specified term, appealing to those who require a more affordable option for temporary coverage needs. In contrast, whole life policies are more expensive because they include investment components and lifetime coverage. This affordability makes term insurance a popular choice for individuals seeking to insure their lives for a limited time period, such as while paying off a mortgage or raising children.

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They offer coverage for the entire lifetime of the insured

They are difficult to obtain

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