Sorry to hear of your loss - it's a very emotional time for you, I am sure. The RAC is indeed being pedantic, they should not have cancelled all cover. You do not need to be the legal owner of the vehicle to obtain cover on it, so there should be no issue insuring the vehicle in your name. Raise a complaint with RAC advise that they should not have cancelled the cover as you still have an "insurable interest" in the vehicle. They will argue that your wife was the main policyholder and that she can no longer maintain a contract due to her passing, this is not exactly correct as it depends on who is part of the contract. Plus, there is scope for compassion and leniency within any contract, it just needs for the other party to agree to it.

* Following this Ask, the RAC contacted Mr Saunders. Their statement reads:
"We are very sorry to hear of the difficult experience Mr Saunders had when he called to notify us that his wife had passed away. Our representative didn’t show the level of empathy and understanding we would expect in this circumstance, and we are sorry that Mr Saunders wasn’t provided with a solution to continue his insurance cover. We have apologised to him and arranged for his cover to resume, as well as providing our representative with feedback and coaching."