Arkansas Life and Health Insurance Practice Exam

If the insured dies while the grace period is in effect, the death benefit paid is the face amount, minus the:

1. Interest due

2. Loan amount

3. Premiums due

4. Surrender charges

The correct answer is: Interest due

If the insured dies while the grace period is in effect, the death benefit paid is typically the face amount of the policy minus any outstanding premiums due. The grace period is a specified period after the premium due date during which the policy remains in force even though the premium has not been paid. Therefore, the correct answer is C. Premiums due. Option A, interest due, is incorrect because interest is not typically deducted from the death benefit in the scenario described. Option B, loan amount, is not relevant unless the insured had taken a loan against the policy, which would then be deducted from the death benefit. Option D, surrender charges, are typically associated with cash value life insurance policies if the policy is surrendered before a certain period; in the scenario described, surrender charges are not relevant to the death benefit calculation during the grace period.