What amount is payable to the beneficiary if the insured dies during the grace period for an unpaid policy?

The correct answer reflects the standard policy provisions in the event of an insured individual's death during the grace period for an unpaid premium. When a policyholder dies during the grace period, the insurance company will deduct any unpaid premiums from the face amount of the policy before paying out to the beneficiary.

This approach ensures that while the policy remains in force during the grace period—allowing for a limited time for the policyholder to pay the missed premium—the insurer minimizes its loss by withholding the amount owed. This practice is consistent with the underlying principle of insurance where coverage is contingent upon the fulfillment of premium payments, even while the policyholder is afforded a temporary reprieve.

In contrast, the other options suggest scenarios that do not align with how insurance policies typically function. For instance, adding unpaid premiums to the face amount or paying the full face amount regardless of those premiums would undermine the intended financial management of the insurance contract, as it would provide coverage without reflecting the premium obligation. Adjusting the face amount for inflation, while relevant in some contexts, does not apply to the specific circumstance of unpaid premiums during the grace period.