Registered Insurance Brokers of Ontario (RIBO) Level 2 Practice Exam

The primary difference between term life insurance and whole life insurance lies in the duration of coverage. Term life insurance is designed to provide coverage for a predetermined period or "term," such as 10, 20, or 30 years. If the insured passes away during this period, the beneficiary receives the death benefit. However, once the term expires, the coverage ceases, and there is no payout if the insured is still alive.

On the other hand, whole life insurance, as the name suggests, provides coverage for the insured's entire lifetime, as long as premiums are paid. This ensures that the death benefit will be paid out regardless of when the insured passes away, offering a sense of security and permanence.

The other choices do not accurately define the distinction between the two types of insurance. Whole life insurance generally has higher premiums than term insurance, contrary to the notion of lower cost. Additionally, term life insurance does not accumulate cash value over time, which is a characteristic of whole life policies. Whole life insurance is not renewable in the same manner as term insurance, which typically allows for annual renewals without additional underwriting, as whole life policies are designed to remain in force indefinitely without the need for renewal.