Arkansas Life and Health Insurance Practice Exam 2025 - Free Life and Health Insurance Practice Questions and Study Guide

In a life insurance policy, when an insured passes away during the grace period, the insurance company typically pays the death benefit, which is generally the face amount of the policy. However, any amounts that are owed by the insured at the time of death are deducted from the death benefit.

The correct consideration in this scenario is the interest that is due. If the premium payments are not made by the end of the grace period, the insurance company may have accrued interest on the unpaid premiums. Therefore, the amount paid to the beneficiaries will be reduced by the interest that is due along with any unpaid premiums.

Other options like the loan amount, premiums due, and surrender charges are not applicable in this specific context because they do not directly relate to the grace period policy provision for deducting amounts from the benefit distributed at the time of death. Understanding this helps clarify the financial relationships within the life insurance policy during a grace period and the conditions affecting the death benefit payout.