State RegulationsTX specificDifficulty 2/5
A Texas policyowner has not paid the premium due on an individual life policy, but dies while the policy is still within its grace period under TIC 1101.005. What is the insurer's obligation?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 1101.005, the policy remains in force during the grace period, so a death during that period is a covered loss; the insurer settles the claim and may deduct the overdue premium from the amount payable, together with any interest TIC 1101.005 permits it to charge on a premium paid during grace. The grace provision exists precisely to protect the owner against an inadvertent lapse, so coverage does not end on the premium due date.
Why the other options are wrong
- A) The cash surrender value is not the measure of the death benefit, because the policy was still in force under the grace provision.
- C) The insurer is entitled to deduct the overdue premium from the proceeds rather than paying the full face amount without adjustment.
- D) Coverage continues throughout the grace period, so a death within that period is a covered loss rather than a barred claim.
Memory hook
Grace keeps the coverage alive; the overdue premium just comes out of the check.