Primerica Life Producer Practice Test

In New Jersey, what is NOT required when a policy is discontinued for nonpayment of premiums?

1. Notice of discontinuance

2. Refund of premiums

3. Continuation of coverage

4. Grace period for payment

The correct answer is: Refund of premiums

In New Jersey, when a policy is discontinued for nonpayment of premiums, a refund of premiums is not required. This means that if a policyholder fails to pay their premiums, the insurer is not obligated to return any amounts paid for the coverage prior to cancellation. Generally, insurers focus on the contractual obligations defined within the policy, and unless specified in the terms, a refund for premiums paid is not guaranteed upon cancellation due to nonpayment. In contrast to this, other legal and policy requirements exist. For instance, a notice of discontinuance is typically required to inform the policyholder that their coverage has been terminated. Additionally, a grace period for payment is often mandated to allow the policyholder time to pay any outstanding premiums before the policy is canceled. Continuation of coverage can also be an important requirement in certain situations, ensuring that the policyholder retains some degree of protection for a set time after the initial nonpayment occurs.