North Carolina Life Agent Practice Exam

The correct answer highlights the two primary categories of life insurance: permanent and term life insurance.

Term life insurance provides coverage for a specified period, typically ranging from one to thirty years. It pays a death benefit only if the insured passes away during that term and does not accumulate cash value. This type of insurance is often more affordable compared to permanent options, making it a popular choice for individuals seeking financial protection for a limited time, such as during the years when dependents are present or debts are being repaid.

Permanent life insurance, on the other hand, offers lifelong coverage and includes various forms such as whole life, universal life, and variable life insurance. These policies not only provide a death benefit but also accumulate cash value over time, which can be borrowed against or withdrawn. The cash value component adds an investment aspect to the policy, allowing some level of growth based on interest or market performance, depending on the type of permanent policy.

Understanding these two main types of life insurance helps individuals determine their insurance needs based on factors like financial goals, family situation, and budget.