An industrial life policyowner is inside the grace period with her premium unpaid when she dies. Under N.J.S.A. 17B:25-3, the insurer may deduct the overdue premium plus grace-period interest — capped at what annual rate — from the death benefit before paying the claim?

Why B is correct

Because the industrial life policy stays in force during the grace period, the claim is payable even though the premium is unpaid — but N.J.S.A. 17B:25-3 lets the insurer deduct the overdue premium plus interest at no more than 6% per annum, together with any deferred premiums of the current policy year, from the proceeds. The policyholder's beneficiaries therefore receive the face amount net of the arrears and modest interest, and the insurer cannot use the grace period to impose a punitive charge. The New Jersey Department of Banking and Insurance enforces the terms of this statutory scheme.

Why the other options are wrong

• A) 4% is not the statutory cap; the grace-period interest on deducted arrears is limited to 6% per annum.
• C) 10% overstates the lawful charge; the statute fixes the maximum at 6% per annum.
• D) 12% belongs to other interest contexts and is not the grace-period interest ceiling under N.J.S.A. 17B:25-3.

Memory hook

Die in grace, still get paid — minus arrears and six percent.