State RegulationsMI specificDifficulty 1/5
A Michigan insurer fails to pay life insurance proceeds within 60 days after receiving satisfactory proof of loss. What interest accrues on the unpaid proceeds?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
M.C.L. 500.2006 provides that benefits not paid within 60 days after satisfactory proof of loss is filed accrue interest at 12% per annum on the unpaid amount. This gives Michigan claimants a statutory return on every dollar the insurer holds past the 60-day mark, and it gives insurers a strong financial incentive to pay clean claims promptly. The interest obligation is automatic — the claimant does not have to prove fault.
Why the other options are wrong
- A) 6% is not the rate Michigan imposes; the statutory rate under M.C.L. 500.2006 is 12% per annum.
- C) 18% exceeds the statutory rate and has no basis in M.C.L. 500.2006.
- D) Interest is mandatory once the 60-day period passes; M.C.L. 500.2006 does not leave it to the insurer's discretion.
Memory hook
60 days late? 12% is the Michigan rate.