Axel owns a $150,000 whole life insurance policy with an accumulated cash surrender value (CSV) of $20,000. His monthly premiums are $300, due on the fifth day of each month. Axel misses his November 5 premium payment and then dies a few weeks later, on November 20.

Life insurance policies include a contractual grace period, typically 30 or 31 days, following a missed premium payment. During this time, the policy remains in full force. Axel died on November 20, which is 15 days after his premium due date of November 5. Since his death occurred within the grace period, the policy is still valid and the death benefit is payable to his beneficiary. However, the insurer is entitled to deduct any premiums that are due and unpaid. Therefore, the single missed monthly premium of $300 is subtracted from the policy's face amount. The net amount paid to the beneficiary is $150,000 - $300 = $149,700.

A. $0: This is incorrect because the policy has not lapsed. The death occurred within the mandatory grace period, during which the coverage remains active.
C. $150,000: This is incorrect because the insurer has the right to deduct the overdue premium from the death benefit proceeds before paying the claim.
D. $169,700: This is incorrect because the cash surrender value (CSV) is not paid out in addition to the death benefit. The death benefit is the face amount of the policy.

1. IFSE Institute, Life Insurance (LLQP), 2023.

Chapter 5: Contractual Provisions – The Policy. In the section on "Grace Period," it is stated that if the insured dies during the grace period without the premium having been paid, the amount of the premium is deducted from the insurance money payable. This directly supports the calculation of $150,000 - $300.

Chapter 3: Permanent Insurance. This chapter explains that the cash surrender value is a component of a whole life policy's value, accessible by the policyowner upon surrender, but it is not an additional benefit paid on top of the face amount at death. The death benefit is the specified face amount.