State RegulationsMI specificDifficulty 2/5
An insured dies on the twentieth day of the grace period with the overdue premium still unpaid. Ignoring any contractual interest, what must the Michigan insurer pay?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
M.C.L. 500.4012 keeps a Michigan individual life policy fully in force throughout the 1-month grace period. If the insured dies during grace, the death benefit is payable, and the statute permits the insurer to deduct the overdue premium (and any interest charge) from the settlement proceeds. The beneficiary collects the benefit rather than losing coverage over a premium still within grace.
Why the other options are wrong
- A) The policy does not lapse until the grace period ends; death during grace triggers the death benefit under M.C.L. 500.4012.
- C) The insurer pays the death benefit less the overdue premium; it does not add a refund of all prior premiums to the settlement.
- D) Paying only the cash surrender value would strip away the death protection that remains in force during the grace period.
Memory hook
Die in grace and the check still comes — minus the premium owed.