The correct answer is: C. The insurer will pay the claim after deducting the unpaid premium.
A grace period is a period of time, usually 30 days, after the premium due date during which the policy holder can pay the premium without the policy lapsing. If the policy holder does not pay the premium within the grace period, the policy will lapse and the insurer will not be liable to pay any claims.
However, if the policy holder dies during the grace period, the insurer will usually pay the claim after deducting the unpaid premium. This is because the insurer considers the policy to be in force at the time of death, even though it has lapsed.
The insurer may also charge interest on the unpaid premium. The rate of interest will usually be specified in the policy terms and conditions.
Options A and B are incorrect because the insurer will usually pay the claim if the policy holder dies during the grace period. Option D is incorrect because the insurer will usually charge interest on the unpaid premium, but the rate of interest will not be 2% above the bank savings interest rate.