Texas Life Agent Practice Exam 2026 – Comprehensive All-in-One Guide to Master Your Certification!

In this scenario, the insurance company is obligated to pay the face amount of the policy minus any unpaid premiums. This is due to the fact that the insured passed away during the grace period, which is a designated timeframe that allows policyholders to make premium payments after the due date without losing coverage.

During the grace period, the policy remains in force, and the insurer must honor the claim. However, any outstanding premiums that were not paid will be deducted from the death benefit. This means that while the insurer will pay the full face amount of the policy, they will also subtract the amount of any premiums that were due but not paid at the time of the insured's death.

This ensures that the insurance coverage is maintained even if the policyholder has not completed the payment for the latest premium while recognizing the need to uphold the terms of the policy. Thus, the correct answer accurately reflects the obligations of the insurance company in this situation.