State RegulationsVA specificDifficulty 1/5
A Virginia life policyowner pays a premium after the due date but within the grace period. Under Va. Code § 38.2-3303, what is the ceiling on the interest the insurer may charge on the overdue premium?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Va. Code § 38.2-3303 caps the interest an insurer may charge on a premium paid during the grace period at 6% per year or less. The cap keeps the grace period a genuine protection: the policyowner pays the overdue premium plus only modest interest, and the policy remains in force. Candidates should not confuse this 6% ceiling with the 2.5% per year rate that Virginia applies to interest on death proceeds running from the date of death — different provisions, different rates.
Why the other options are wrong
- A) 2.5% per year is the rate for interest on death proceeds accruing from the date of death, not the grace-period interest cap.
- B) 10% per year is higher than the statutory ceiling; grace-period interest may not exceed 6% per year.
- D) 15% per year far exceeds the 6% per year ceiling that Va. Code § 38.2-3303 imposes.
Memory hook
Grace interest tops out at 6% — 2.5% belongs to death proceeds, not late premiums.