What is a term life insurance policy?

A term life insurance policy is designed to provide coverage for a specified period, such as 10, 20, or 30 years. If the policyholder passes away during this term, the beneficiary receives the death benefit. This type of insurance is particularly appealing for individuals seeking affordable coverage for a limited time, as it typically has lower premiums compared to permanent life insurance policies.

In contrast, policies that provide lifelong coverage would fall into the category of whole life or universal life insurance, which are designed to last until the insured passes away, as long as premiums are paid. Furthermore, term life insurance does not build cash value, which is a characteristic of permanent life insurance policies. Lastly, all term life insurance policies include a death benefit, which distinguishes them from options that may not provide this benefit at all. Thus, the defining characteristic of a term life insurance policy is its limited duration of coverage, making "a policy that covers a specific period" the accurate description.