State RegulationsMA specificDifficulty 1/5
Under M.G.L. c. 175, § 132(1), what is the maximum optional annual interest rate a Massachusetts life insurer may charge on an overdue premium during the grace period?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
M.G.L. c. 175, § 132(1) permits the Massachusetts life insurer, at its option, to charge interest on a premium overdue during the grace period at a rate not exceeding 6% per annum. The grace period itself runs 30 days, and the interest charge is a ceiling the statute imposes on insurers that choose to levy it. A premium paid during grace with the allowed interest keeps the policy fully in force.
Why the other options are wrong
- A) 15% is the Massachusetts cap on the annual Medicare supplement late-enrollee surcharge, not the grace-period interest ceiling.
- B) 18% is a Mini-COBRA figure unrelated to grace-period interest; the statutory ceiling is 6% per annum under M.G.L. c. 175, § 132(1).
- D) 3% understates the ceiling; the statute allows up to 6% per annum on overdue premiums during grace.
Memory hook
Grace costs at most six percent a year in Massachusetts.