Rhode Island Life Insurance Practice Exam

If an insured dies during the Grace Period, what amount does the beneficiary receive?

1. Full face amount with additional benefits

2. Full face amount minus any past due premiums

3. Half of the policy's face value

4. No payout due to lapse of policy

The correct answer is: Full face amount minus any past due premiums

When an insured passes away during the Grace Period, the beneficiary is entitled to receive the full face amount of the policy, but any past due premiums will be subtracted from this total. The Grace Period is a designated timeframe, typically ranging from 30 to 31 days, during which the policy remains active despite the non-payment of premiums. If the insured dies within this timeframe, the insurance company honors the policy and pays the death benefit, but it does expect that any overdue payments be settled. This ensures that the insurer remains protected financially since premiums contribute to the risk pool. Thus, by deducting any unpaid premiums from the benefit, the insurer balances out its obligation to pay the benefit to the deceased's beneficiaries while also recouping losses due to non-payment. This is why the amount received by the beneficiary is the full face amount minus any past due premiums.