What happens if the insured individual dies from a covered cause while the policy is in force?

When an insured individual passes away from a covered cause while the life insurance policy is active, the primary function of the policy is to provide a death benefit to the named beneficiary. This benefit is typically structured to be paid out tax-free, ensuring that the full amount specified in the policy is received by the beneficiary without tax deductions. This feature reflects the purpose of life insurance, which is to offer financial support to the loved ones left behind and to facilitate financial security at a time of loss.

In this context, the other outcomes presented do not align with the fundamental purpose of life insurance and how it operates under these circumstances. The benefit is not paid to an agent, policies do not automatically terminate with the death of the insured, and premiums are not refunded simply because a payout has been made. Therefore, recognizing that the correct answer is that a tax-free benefit is payable to the beneficiary highlights the essential protection life insurance provides to families and dependents during challenging times.