If an insured dies during the grace period with premiums unpaid, what happens to the death benefit?

• A. The policy would be payable in full
• B. There is no death benefit
• C. The death benefit is payable minus the premium amount
• D. The policy lapses and pays nothing

Answer: (C)

When a life insurance policy is in its grace period, the policy is still considered in force even though a premium is overdue. If the insured dies during that grace period, the death benefit is paid, but the amount due for the unpaid premiums is deducted from the death benefit. So the payout equals the face amount minus the overdue premium (and any interest if applicable). This is why the correct result is the death benefit payable minus the premium amount. The other possibilities would ignore the unpaid premium or assume the policy has already lapsed, which isn’t the case while the grace period is active.