Chartered Life Underwriter Practice Exam 2026 - Free CLU Practice Questions and Study Guide

Term insurance is designed to provide coverage for a specified period, typically focusing on the financial protection of dependents or loved ones in the event of the policyholder's untimely death. It pays a death benefit if the insured passes away during the term of the policy, making it suitable for those who have financial obligations, such as supporting a family or replacing lost income.

In the context of replacing income during working years, term insurance directly addresses the need to ensure financial security for a family that relies on the policyholder's earnings. Should the policyholder die prematurely, the death benefit from the term insurance policy can provide the surviving family members with much-needed funds to cover daily living expenses, mortgage payments, and other financial obligations that would otherwise be difficult to manage without the deceased's income.

Term insurance is not geared towards funding retirement plans, as these generally require a long-term investment strategy and growth over time. Additionally, while it could be a consideration for covering college tuition, those costs are often planned for over a longer duration, generally requiring either endowment policies or other forms of savings rather than term insurance. Similarly, building wealth through investment does not align with the purpose of term insurance, as it provides no cash value accumulation. Overall, the primary function