What is a disadvantage of term insurance?

Term insurance is designed to provide coverage for a specified period, typically ranging from one to thirty years. A significant disadvantage of this type of insurance is that it does not accumulate any cash value over time, unlike whole or universal life insurance policies. If the policyholder decides to cancel the term insurance, they will not receive any return on premiums paid, as there is no cash value to recover. This means that the policyholder essentially forfeits any financial benefit from the premiums invested if they choose to cancel the policy before it matures or before a claim is made.

In contrast, options focusing on lifelong coverage, tax-deferred cash value, and guaranteed payouts upon expiration do not accurately describe term insurance. Lifelong coverage is characteristic of permanent life insurance, tax-deferred cash value refers to the investment component in permanent insurance, and the guarantee of a payout upon expiration is typically a benefit associated with certain forms of permanent insurance rather than term insurance.