Comprehensive and Detailed Step by Step Explanation:
When a death claim is filed on a life insurance policy with an outstanding loan:
Deducted from the face amount (A):The death benefit is reduced by the loan balance plus any accrued interest, ensuring the insurer recovers the outstanding debt.
Beneficiary obligation (B):Incorrect. The beneficiary receives the adjusted benefit without personal liability for the loan.
Claim against the estate (C):Incorrect. The loan is tied to the policy, not the estate.
Canceled without adjustment (D):Incorrect, as insurers must recoup the loan amount from the death benefit.
[References:Maryland Life Insurance Policy Loan Provisions, COMAR 31.09.03, and Standard Death Claim Settlement Practices., ]
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