Massachusetts Life Producer Practice Exam

If an insured dies during the grace period without having paid the premium, how much will the insurer pay?

1. Policy's face amount

2. Policy's face amount minus the premiums due

3. Only the premiums paid to date

4. The total value of the policy including future premiums

The correct answer is: Policy's face amount minus the premiums due

When an insured dies during the grace period without having paid the premium, the insurer will pay the policy's face amount minus the premiums due. The grace period is a specific time frame following the premium due date during which the policyholder can still make their payment without risking the lapse of their coverage. If the insured passes away during this grace period, the insurer will deduct any unpaid premium amounts from the policy's death benefit. The rationale behind this approach is that the insurer has not received the necessary payment to keep the policy fully in force, so it adjusts the payout accordingly by considering the amount that remains due. Thus, the correct answer reflects this standard practice in life insurance policies, ensuring that the insurer appropriately manages the risk associated with unpaid premiums. Policies typically do not allow for the total face amount to be paid out if there are outstanding payments, nor do they typically cover only the premiums paid or consider future premiums, as this does not align with the contractual obligation created by the insured and insurer.