State RegulationsTX specificDifficulty 2/5
A Texas insured dies during the policy's grace period, before the overdue renewal premium has been paid. How is the death claim settled?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under TIC 1101.005, the policy remains in force throughout the grace period, so a death during grace is a covered death; the insurer pays the death benefit and may deduct the unpaid premium (together with any permitted interest) from the settlement. The practical consequence is that beneficiaries receive a net amount, which is why an agent should warn a client in poor health never to let a policy drift into grace.
Why the other options are wrong
- B) A policy cannot lapse while the grace period is still running; nonpayment only takes effect after grace expires without payment.
- C) The statute expressly allows the overdue premium to be deducted from the settlement.
- D) Cash surrender value governs a surrender, not a death that occurs while the policy is still in force.
Memory hook
Dead in grace is dead covered — minus the unpaid premium.