An insured dies one week into the grace period, having never paid the premium that came due. Under 40 P.S. § 510(b), what does the insurer do with the death claim?

Why C is correct

40 P.S. § 510(b) keeps the policy in force during the grace period, so death during that window is a covered death. The statute balances this protection with a built-in collection mechanism: the insurer pays the settlement but deducts the unpaid premium, together with optional interest that may not exceed 8% per annum, from the proceeds. The beneficiary therefore receives the death benefit net of the missed premium and allowed interest — the claim is honored, not denied, and no separate repayment step is required.

Why the other options are wrong

• A) Denial is wrong because the policy is in force during the grace period; the statute's remedy is a deduction from the settlement, not forfeiture.
• B) The full benefit without deduction ignores 40 P.S. § 510(b), which expressly allows the unpaid premium plus permitted interest to be taken from the settlement.
• D) The statute deducts the overdue premium from the proceeds directly; the beneficiary never has to arrange a separate repayment before collection.

Memory hook

Die in grace, still get paid — minus the missed premium and at most 8% interest.