State RegulationsMI specificDifficulty 1/5
Under the unpaid premium optional provision authorized by M.C.L. 500.3446, what may a Michigan disability insurer do with an unpaid premium when it pays a claim?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.C.L. 500.3446 lists unpaid premium among the optional provisions for Michigan individual disability policies. When the provision is included, the insurer paying a loss may deduct any premium then due and unpaid from the claim payment and pay the remainder to the insured. This settles the overdue premium in one transaction instead of forcing the insured to make a separate payment while a valid claim is pending, and it does not convert the overdue premium into a defense against the claim.
Why the other options are wrong
- B) Withholding the whole claim is not authorized; the insurer deducts the unpaid premium from the proceeds and pays the balance.
- C) The provision authorizes a deduction of the unpaid premium, not the imposition of an interest charge on it.
- D) The policy is not retroactively canceled; the provision is designed to keep the claim payable while collecting the arrears.
Memory hook
Claim comes due, premium comes out: net the arrears from the check.