The policy of insurance here sued on was a regular life policy in the sum of $2,000, payable upon the death of the insured, and required the payment of an annual premium during the life of the insured. It contained a provision by which it could be converted into a paid-up policy, as follows:
"Non-forfeiture. After this policy shall have been in force three full years, the insured may elect within three months after any default in payment of premium, but not later, any one of the following options:
"* * * Option 2 — Paid-Up Life Insurance. Have this policy endorsed by the Company for a reduced amount of non-participating paid-up life insurance, payable at the same time and on the same conditions as this policy."
The policy was taken out on April 20, 1920. The insured paid each annual premium in advance up to and including the premium due April 20, 1931. On February 12, 1932, the insured began negotiations for the purpose of having the policy converted into a paid-up policy, and thereafter on April 5, 1932, after some correspondence with the company, the insured signed a formal request to the company on blanks furnished by it to have the policy indorsed as "continued in force as a non-participating paid-up policy for the reduced amount of $1,118.00. * * *" The company so indorsed the policy "as of April 20, 1932." The record does not show just when this indorsement was placed upon the policy, nor does it show that the insured was advised that such indorsement had been made. The insured died April 20, 1932.
Is the beneficiary under the policy entitled to recover the sum of $2,000, the full face value of the policy, or only $1,118, that being the paid-up value thereof? This depends on whether or not the agreement to convert the policy became effective prior to the death of the insured. The effective date of such conversion is dependent on the intention of the parties. The contract for the conversion of the policy is evidenced by the company's offer as embodied in the option set out in the policy and the insured's acceptance as embodied in his request of date April 5, 1932. Neither of these instruments state specifically when the conversion was to take effect. In ascertaining such intention, we may therefore take into consideration not only the terms of the company's offer and the insured's acceptance, but the circumstances surrounding the parties at the time of the making of the contract and the purposes to be accomplished thereby. Restatement, Contracts, § 236. The company's offer of such option was carried under the heading "Non-forfeiture," and was intended as a privilege extended to the insured to enable him to avoid a forfeiture in the event of default in the payment of premium. The right to make such election was to be exercised "within three months after any default in the payment of premium." Default in the payment of premium was to be the occasion for exercising such election, and an avoidance of a forfeiture was to be the purpose to be accomplished. We may assume that the insured's request was made in the light of the terms of the policy providing for such privilege and of the circumstances prompting him to make such request. His purpose was to be relieved of the necessity of paying an additional premium and at the same time have his insurance remain in force for the fullest amount possible. By the payment of the annual premium on April 20, 1931, he thereby paid for insurance to the amount of the face value of the policy for the full period of one year. It would be unreasonable to assume that he desired to voluntarily and without consideration reduce the amount of insurance for which he had fully paid before the necessity for such reduction arose. No advantage could possibly have *Page 1066 accrued to him by pursuing such a course. We may therefore assume that it was the intention of the parties that such conversion of the policy into a paid-up policy for an amount less than its face value was to take effect only when there had been a default in the payment of premium and when such conversion had become necessary in order to avoid a forfeiture. If such was the intention of the parties at the time the insured accepted the company's offer, then the company had no right by indorsement on the policy to arbitrarily fix an earlier date as the effective date for such conversion.
This brings us to a decision of the question as to when such conversion became necessary in order to avoid a forfeiture, and this depends on when there would have been a default in the absence of the payment of an additional premium. As stated before, the last annual premium was paid on April 20, 1931. The next premium was due April 20, 1932, which was the day on which the insured died. The policy did not specify any particular hour for the payment of the annual premium. The general rule is that, where a premium is to be paid on a certain day, but no particular hour is specified for the payment thereof, the insured has the whole of such day and until midnight thereof in which to pay such premium without being in default. During such time the policy remains in full force and effect without the necessity of the payment of an additional premium. 37 C.J. 488; Couch on Insurance, p. 2042; Cooley's Briefs on Insurance, vol. 4, p. 3622; Vance on Insurance (2d Ed.) 268; Ætna Ins. Co. v. Wimberly,102 Tex. 49, 112 S.W. 1038, 23 L.R.A. (N.S.) 759, 132 Am. St. Rep. 852; Meridian Life Ins. Co. v. Milam, 172 Ky. 75, 188 S.W. 879, L.R.A. 1917B, 103. Consequently, the policy in question, by its terms, would have remained in force for the full face amount thereof during the whole of the day on which the insured died without the payment of any additional premium. Therefore the necessity for conversion in order to avoid a forfeiture had not arisen at the hour of the insured's death, and hence the effective date when such conversion was to take place had not then arrived.
The beneficiary was entitled to recover the full amount of the policy, and we therefore concur in an affirmance of the judgment of the trial court.