Question

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy ________?

A) Accumulates cash value over time.
B) Provides coverage for a fixed number of years.
C) Offers a death benefit that increases annually.
D) Allows him to borrow against the policy.

Answer 1

The man's Annually Renewable Term Life policy provides coverage for a fixed number of years, without accumulating cash value, allowing borrowing against the policy, or offering an increasing death benefit.

Step-by-step explanation:

The man's policy in the question is an Annually Renewable Term Life policy, which can be defined by a few characteristics. The correct answer to the provided question is that his policy:

Provides coverage for a fixed number of years

.

Unlike cash-value (whole) life insurance, term life insurance does not accumulate cash value over time, nor does it allow the policyholder to borrow against the policy. Additionally, the death benefit of a term life insurance policy does not typically increase annually; it remains fixed for the term of the policy. Therefore, options A, C, and D are not correct. Term life policies are generally more affordable and are popular among individuals who seek coverage for a specific time period, such as until their children finish college.