If a claim is made during the grace period, what can an insurer do regarding overdue premiums?

When a claim is made during the grace period of a life insurance policy, the insurer has specific rights concerning overdue premiums. The correct action for the insurer is to deduct the overdue premium from the claim payout and potentially charge interest. The grace period is a specified time frame after the premium due date during which the policy remains in force despite the premium not being paid. However, if a claim occurs during this time, the insurer is entitled to ensure they do not incur a loss from unpaid premiums.

Affordable premiums are an essential aspect of maintaining the policy's integrity, and deducting overdue amounts allows the insurer to settle the claim fairly while considering the policyholder's outstanding obligations. This practice helps balance the insurer's financial interests with the policyholder's protection.

The option to waive all premiums due is not standard because it could lead to adverse financial implications for the insurer. Paying the claim in full without addressing the overdue premiums would also undermine the policy’s terms, and limiting the claim amount to the policy’s face value overlooks the principle that premiums must be settled to maintain coverage. Therefore, deducting overdue premiums and possibly applying interest maintains the integrity of the policy and ensures compliance with the contractual obligations between the insurer and the policyholder.