State RegulationsTN specificDifficulty 2/5
An insured dies two weeks after the due date of a premium on an individual life policy in Tennessee, while the policy is in its grace period. How must the insurer handle the claim?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
T.C.A. § 56-7-2307(2) keeps an individual life policy in force during the 1-month grace period; if death occurs while a premium is past due, the claim remains payable and the insurer deducts the overdue premium from the settlement. The Tennessee Department of Commerce & Insurance treats the grace period as continued coverage rather than a lapse, so the beneficiary collects the benefit subject only to that deduction.
Why the other options are wrong
- A) The policy does not lapse during the grace period, so the claim is not denied merely because the premium was outstanding at death.
- B) The statute specifically directs the insurer to deduct the overdue premium; the full benefit is paid only when no premium is outstanding.
- D) Premiums are not refunded; the death benefit is paid minus the overdue premium under T.C.A. § 56-7-2307(2).
Memory hook
Die in grace? Claim paid, premium skimmed — the month keeps the policy alive.