If a terminated employee dies during the grace period of their group life policy, what happens to the death benefit?

The full benefit being paid to the beneficiary is the correct outcome when a terminated employee dies during the grace period of their group life policy.

In insurance terms, a grace period is a set duration (usually 30 days) following the premium due date during which the policyholder can make their payment without losing coverage. If the policyholder—here, the terminated employee—dies during this grace period, the policy is still considered active, as the premium can still be paid within that timeframe. Thus, the insurer is obligated to honor the terms of the policy, which includes paying out the full death benefit to the designated beneficiary, assuming all other policy conditions are met.

By having this provision in place, it ensures that coverage remains intact for individuals who might find themselves in a transitional phase, such as termination of employment, giving them peace of mind during uncertain times.