Tennessee Life Producer Practice Exam

If the insured dies during the Grace Period after missing a premium payment, what will the beneficiary receive?

1. No Benefit

2. Half of the Face Amount

3. Full Face Amount minus Past Due Premiums

4. Full Face Amount

The correct answer is: Full Face Amount minus Past Due Premiums

The situation described pertains to the grace period in life insurance policies, which is a time frame allowing the policyholder to make a premium payment after the due date without losing coverage. If the insured dies during this grace period, the insurer is obligated to pay the benefit to the beneficiary. However, since the premium payment has not been made, the payment will be adjusted accordingly. The correct answer indicates that the beneficiary will receive the full face amount of the policy minus any overdue premiums. This means that while the policy is still valid during the grace period, the insurer deducts the amount of unpaid premiums from the total face value when paying the claim. This approach helps to ensure that the insurer is not paying out a benefit for a policy that has not been fully funded through premium payments. It emphasizes the importance of keeping up with premium payments while also recognizing the safety net provided by the grace period, which protects the insured's beneficiaries in case of unforeseen events during a lapse in payment.