State RegulationsIL specificDifficulty 2/5
A life insured dies on day 12 of a 30-day grace period with the premium still unpaid. Under 215 ILCS 5/224, how must the Illinois insurer handle the death claim?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
215 ILCS 5/224(1)(b) keeps an individual life policy in force through the 30-day or one-month grace period even while a premium is overdue. If the insured dies during the grace period, the insurer pays the death benefit minus the overdue premium, and the interest it may charge on that overdue amount is capped at 6% per annum. The claim is adjusted and paid without any reinstatement step because the policy never lapsed.
Why the other options are wrong
- A) The grace period preserves coverage during the unpaid window, so death during grace is not a denial event under 215 ILCS 5/224(1)(b).
- B) The statute lets the insurer deduct the overdue premium from the benefit; it does not require the insurer to forgive it or refund anything.
- D) Reinstatement applies only after a policy has actually lapsed; a death during the grace period is simply adjusted and paid.
Memory hook
Dies in grace? Pay the benefit, subtract the premium, charge at most 6%.