Which of the following best describes the features of term life insurance?

Introduction / Context:
Term life insurance is one of the simplest and most widely used forms of life insurance. It is frequently tested in personal finance and insurance exams because it contrasts clearly with whole life and endowment policies. The key features of term life are the limited period of coverage, pure risk protection and the absence of a savings or cash value component. This question asks which statement best summarises these features.

Given Data / Assumptions:

• The policy provides a death benefit if the insured dies while the policy is in force.
• The cover is for a specified term, such as 10, 20 or 30 years.
• If the term ends and the insured is still alive, there is usually no payout.
• Premiums are typically lower than for policies that include an investment or savings element.

Concept / Approach:
Term life insurance is designed as pure risk coverage. The insurer charges a premium to cover the risk that the insured may die during the specified term. If death occurs in that period, the insurer pays the face amount to the beneficiaries. If the insured survives the term and the policy is not renewed, coverage ends without any maturity value or cash surrender value. This is different from whole life or endowment policies that include savings components or lifetime coverage. The correct option must capture the limited term, death benefit condition and lack of cash value.

Step-by-Step Solution:
Step 1: Identify that term life provides coverage for a finite period rather than for the entire lifetime without change. Step 2: Note that the primary benefit is paid only if the insured dies during that term; if the insured survives, there is typically no payout at maturity. Step 3: Recognise that term policies generally do not accumulate cash value or savings that the policyholder can borrow or withdraw. Step 4: Compare each option to see which one mentions these core characteristics together. Step 5: Select the option that states that term life provides life cover for a specified term, pays a death benefit if death occurs during that period and normally has no savings component.

Verification / Alternative check:
Imagine a person buys a 20 year term life policy with a face amount of 2,000,000 units of currency. The person pays annual premiums for 20 years. If the person dies in year 15, the insurer pays 2,000,000 to the beneficiaries. If the person is still alive at the end of year 20 and the policy expires without renewal, there is no payout and coverage ends. There is no cash value built up in the policy; its sole purpose was to provide financial protection during the term. This example demonstrates the core features reflected in the correct statement.

Why Other Options Are Wrong:
Option B describes whole life or permanent insurance, which offers lifetime coverage and builds cash value, not term life. Option C incorrectly suggests that benefits are paid regardless of whether the insured lives or dies, which contradicts pure risk coverage. Option D resembles some endowment plans that pay a lump sum at maturity if the insured survives, again not characteristic of term policies. Option E confuses life insurance with health or medical insurance, as term life is specifically designed to cover the risk of death, not hospital expenses alone.

Common Pitfalls:
A common pitfall is to assume that all life insurance products combine protection and investment features. This leads to confusion between term, whole life and endowment policies. Another mistake is to think that term life premiums are wasted if no claim is made, ignoring the fact that insurance is about risk transfer and peace of mind rather than guaranteed return. For exam purposes, remembering that term life is pure, temporary risk cover with no savings element helps select the correct description quickly.

Final Answer:
It provides life cover for a specified term only, pays a death benefit if the insured dies during that term and normally has no savings or cash value component.