Question

A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true?

1) The policyowner's beneficiary will receive the full $50,000 death benefit.
2) The policyowner's beneficiary will receive a partial death benefit.
3) The policyowner's beneficiary will not receive any death benefit.
4) The policyowner's beneficiary will receive a refund of the premium paid.

Answer 1

When a policyowner dies within the contestability period and there are no misrepresentations or material omissions on the application, the beneficiary should receive the full death benefit.

Step-by-step explanation:

In this scenario, the policyowner pays the first annual premium for a $50,000 life insurance policy. However, the policyowner dies one month after the policy effective date. Normally, when a policyowner dies within a certain period after the policy effective date, the policy is considered to be in the contestability period. During this period, the insurance company can investigate any statements made on the application, and if they find any misrepresentations or material omissions, they can deny the claim. However, if the policyowner's death is not related to any misrepresentations or material omissions on the application, the policyowner's beneficiary should receive the full $50,000 death benefit.