Which type of insurance typically does NOT build cash value?

Which type of insurance typically does NOT build cash value?

• A. Whole life insurance
• B. Universal life insurance
• C. Term life insurance
• D. Variable life insurance

Answer: (C)

Term life insurance is designed to provide coverage for a specified period of time, such as 10, 20, or even 30 years. It offers a death benefit to the policyholder's beneficiaries if the insured individual passes away during that term. However, it does not accumulate cash value over time. This means that once the policy expires, there is no monetary value or investment component associated with it. In contrast, whole life, universal life, and variable life insurance are all permanent insurance policies that do have a cash value component. Whole life insurance provides guaranteed cash value growth and a fixed death benefit. Universal life offers flexibility in premium payments and death benefits, with cash value that can grow based on interest rates. Variable life insurance allows the policyholder to invest the cash value in a variety of investment options, with potential for growth or loss depending on market performance. Thus, while term life insurance serves the essential purpose of providing financial security without any cash value, the other types of life insurance incorporate a savings or investment element that contributes to cash value accumulation.

Term life insurance is designed to provide coverage for a specified period of time, such as 10, 20, or even 30 years. It offers a death benefit to the policyholder's beneficiaries if the insured individual passes away during that term. However, it does not accumulate cash value over time. This means that once the policy expires, there is no monetary value or investment component associated with it.

In contrast, whole life, universal life, and variable life insurance are all permanent insurance policies that do have a cash value component. Whole life insurance provides guaranteed cash value growth and a fixed death benefit. Universal life offers flexibility in premium payments and death benefits, with cash value that can grow based on interest rates. Variable life insurance allows the policyholder to invest the cash value in a variety of investment options, with potential for growth or loss depending on market performance.

Thus, while term life insurance serves the essential purpose of providing financial security without any cash value, the other types of life insurance incorporate a savings or investment element that contributes to cash value accumulation.