State RegulationsAZ specificDifficulty 2/5
A Tucson insured dies during the 30-day grace period on her individual life policy with the premium still unpaid. Under A.R.S. 20-1203, how is the claim handled?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under A.R.S. 20-1203, coverage continues during the grace period, so a claim arising in grace is payable. The statute lets the insurer deduct the overdue premium (with any policy indebtedness) from the proceeds, which is exactly how the Tucson claim would be settled.
Why the other options are wrong
- A) The grace period keeps the policy in force past the due date, so the claim is not denied for premium nonpayment.
- B) The premium is not waived; the statute permits deduction of the overdue premium from the proceeds rather than forgiving it.
- D) No penalty exists, and the statute does not require the beneficiary to pay first - the insurer simply nets the overdue premium out of the claim.
Memory hook
Die in grace: claim paid minus the overdue premium.