Arizona Life and Health Practice Exam

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An individual files for a claim eight days after missing the premium due date. If the benefit is $500 and the overdue premium is $200, what amount will the insurer pay?

$500
$200
$300
$400

The correct answer is: $300

In this scenario, the insurer will pay the amount of the benefit ($500) minus the overdue premium ($200). When an individual misses a premium payment, many insurance policies have provisions that reduce the benefit amount by the applicable overdue premium if a claim is filed shortly thereafter. Since the overdue premium is $200 and the benefit amount is $500, subtracting the overdue premium from the benefit yields $300. This reflects the insurer’s policy to ensure that premium obligations are met before full benefits are disbursed, as they consider the missed payment while processing the claim. Thus, the insurer will pay $300, which represents the net benefit after accounting for the overdue premium.