What is a key limitation of term insurance?

Term insurance is designed to provide coverage for a specific period, such as 10, 20, or 30 years, and this feature is a defining characteristic of this type of policy. When the term expires, the coverage ends, and the insured may receive no benefits if they outlive the policy. This limitation is significant because it means that if individuals have a temporary need for life insurance or if they do not convert their policy to a different type before expiration, they may find themselves without coverage when it is needed most.

The aspect of having no cash value benefits is another consideration, as term insurance does not accumulate savings like whole life or universal life insurance. This lack of a cash value feature is often perceived as a disadvantage but emphasizes the focus of term insurance on providing pure death benefit protection for a defined period.

Given that term insurance must be renewed each year and typically incurs higher costs as the insured ages, this also reflects a limitation tied to affordability and risk management. Nonetheless, the essential limitation lies in the fact that once the term concludes, the policy provides no further benefits unless renewed or converted to a permanent policy. Hence, the selection that describes the definitive limitation of term insurance particularly well is that it expires after a specific period.