A California policyowner fails to pay a life insurance premium and dies during the 60-day grace period. Under Section 10113.71, the insurer will:

Why A is correct

Section 10113.71 requires a grace period of not less than 60 days for life insurance policies issued or delivered in California. During the grace period the policy remains in force, so if the insured dies before the period expires, the death benefit is payable, but the overdue premium is deducted from the proceeds. The purpose of the grace period is to protect the insured against immediate lapse for a late payment; it does not forgive the premium itself, so the deduction keeps the insurer whole for the unpaid premium.

Why the other options are wrong

• B) The policy is still in force throughout the grace period, so a claim is valid and cannot be denied for nonpayment. The same deduction applies to any unpaid interest or policy loans outstanding at death.
• C) The full death benefit is payable subject only to the premium deduction; the cash value is not substituted for the death benefit. The grace period expressly keeps the contract in force, so a valid claim cannot be denied for nonpayment.
• D) The overdue premium is always deducted from the benefit; there is no deduction only if the premium is actually paid. The death benefit remains the amount payable, reduced only by the unpaid premium and other charges.

Memory hook

Death in the 60-day grace? Benefit paid, unpaid premium subtracted. Mercy keeps the policy alive, not free.