Arkansas Life and Health Insurance Practice Exam

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In life insurance, what is the purpose of the grace period provision?

  1. Allows more time to apply for coverage

  2. Protects the insurer from unscrupulous claims

  3. Prevents a policy from lapsing when premiums are unpaid

  4. Provides additional benefits to the policyholder without an extra charge

The correct answer is: Allows more time to apply for coverage

The purpose of the grace period provision in life insurance is to prevent a policy from lapsing when premiums are unpaid. During this period, which is typically 30 days, the policy remains in force even if the premium has not been paid on time. This gives the policyholder a window of time to make the overdue payment without the risk of losing coverage. It is important for policyholders to be aware of this provision to ensure their policy stays active even if they miss a payment.

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