Final answer:
The death benefit paid out will be the full face value of $25,000 because the waiver of premium clause ensures the insurance company covers the premiums during Josie's total disability.
Step-by-step explanation:
The question focuses on the death benefit Josie's estate will receive given that the insurance company has paid all premiums on her $25,000 life policy, which includes a waiver of premium clause, due to her total disability. The waiver of premium clause means that the insurance company pays the premium instead of the policyholder in the event of the policyholder's total disability.
As a result, despite the $1,200 paid by the insurance company in premiums, the full face value of the policy, which is $25,000, will be paid out as the death benefit. Therefore, if Josie dies now, the insurance company will pay a death benefit of $25,000.