State RegulationsNC specificDifficulty 2/5
An insured in Charlotte dies during the 31-day grace period of a life policy with the premium still unpaid. Under G.S. 58-58-22(1), what must the insurer do?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under G.S. 58-58-22(1), death-benefit coverage continues in force throughout the 31-day grace period, so a death during grace is covered even though the premium is unpaid. The statute expressly allows the insurer to deduct the overdue premium from the claim that arises during grace. The practical effect is that the beneficiary recovers the proceeds minus only the unpaid premium.
Why the other options are wrong
- A) Coverage does not lapse during the grace period; lapse occurs only if the overdue premium remains unpaid after grace ends.
- C) The statute expressly permits the deduction of the overdue premium, so a rule barring any offset overstates the insurer's obligation.
- D) No reduced paid-up concept applies to a death occurring during the grace period.
Memory hook
Grace keeps the death benefit alive; the overdue premium just comes off the top.