An insured in Saginaw dies during the grace period of his individual life policy, with that period's premium still unpaid. Under Michigan law, what must the insurer do?

Why D is correct

M.C.L. 500.4012 keeps coverage in force throughout the 1-month grace period, so a death during the grace period is a covered death. The statute permits the insurer to deduct the overdue premium from the settlement proceeds rather than demanding payment first. The beneficiary therefore receives the death benefit less the unpaid premium (and any permitted interest charge).

Why the other options are wrong

• A) Coverage does not lapse on the due date; the grace period keeps the policy in force, so the claim is payable.
• B) The full benefit is not paid with the premium refunded; the statute instead allows deduction of the overdue premium from the settlement.
• C) A return of premiums is not the remedy; the death benefit is payable, less the overdue premium.

Memory hook

Died in grace? Paid — minus the missed premium.