What happens if death occurs during the grace period after a missed premium?

• A. The policy is canceled and no benefit paid
• B. The policy remains in force but the premiums are increased
• C. The premium due is deducted from the death benefit
• D. The death benefit is paid in full with no deduction

Answer: (C)

When a policy is in its grace period after a missed premium, the coverage stays in force while that payment is being made. If death occurs during that grace period, the death benefit is not paid in full because the overdue premium still needs to be covered. The insurer will pay the death benefit minus the amount of the premium that was due (often with interest on that overdue amount). This ensures the insurer recovers the unpaid premium while still providing coverage during the grace period. If the premium is eventually paid within the grace period, the death benefit is paid in full. If the overdue premium isn’t paid by the end of the grace period, the policy can lapse and future death benefits would not be payable.