Free Life Policy Provisions Options and Riders Study Guide
Delaware Life, Accident & Health exam — Life Policy Provisions Options and Riders.
The national guide explains the standard life provisions (entire contract, incontestability, grace, reinstatement, suicide, misstatement of age), nonforfeiture, dividends, settlement options and riders. Delaware writes its own versions into 18 Del. C. Chapter 29 and regulates replacement in Regulation 1204 and illustrations in Regulation 1210. Several Delaware time limits are longer than the textbook defaults.
Required provisions (18 Del. C. Chapter 29)
| Provision | Delaware rule |
|---|---|
| Grace period | 30 days, or at the insurer's option one month of at least 30 days. The policy stays in force, and the insurer may charge interest of up to 6% a year for the days used. If the insured dies during grace, the overdue premium is deducted from the claim (2906) |
| Entire contract | The policy plus the attached application. Statements are representations, not warranties, unless fraudulent (2907) |
| Incontestability | Incontestable after no more than two years from issue during the insured's lifetime. The only exceptions allowed are nonpayment and, at the insurer's option, disability and accidental death benefits (2908). There is no fraud exception |
| Misstatement of age | The benefit is adjusted to what the premium would have bought at the true age (2909) |
| Dividends | Participating policies apportion surplus annually, starting no later than the end of the third policy year (2910) |
| Policy loans | Available once three full years of premium have been paid and there is cash value. Loan interest is fixed at no more than 8%, or adjustable tied to a bond index (2911). Not required on term policies |
| Reinstatement | Within three years of default, unless the policy was surrendered or extended term has run out. Requires an application, evidence of insurability, and back premium with interest of up to 6% (2913) |
| Death claims | Paid on due proof. Any settlement period the insurer sets can't exceed 30 days after proof (2914) |
- Interest on death claims: runs from the date the claim is filed. Extra interest at 10% a year starts 31 days after the insurer has proof of death and the information it needs (2914(c)).
- Nonforfeiture (2929):
- Cash value after three years of premiums (five for industrial).
- The owner picks an option within 60 days of the missed premium. If the owner doesn't choose, the policy's automatic option applies.
- The insurer may defer cash value payment for six months.
What a Delaware life policy may and may not say
- Permitted exclusions are limited to the listed ones (2926), including:
- war or military service
- aviation
- specified hazardous jobs or hobbies
- living outside the U.S. and Canada
- suicide within two years of issue, sane or insane
- Lawsuits: a policy may not cut the time to sue to less than three years (2926(a)(1)).
- Backdating: a policy may not be dated more than one year before the application (2927).
- A policy may not make the soliciting agent the agent of the insured (2927(a)(3)).
- Prohibited policy types: policies that call premiums "deposits," and tontine plans that pay survivors from others' lapses (2933).
- Copy of application: an application can't be used in evidence unless a copy was attached to the policy (2710).
Replacement (Regulation 1204)
- What counts as replacement: a new purchase where existing coverage is lapsed, reduced, or borrowed against for more than 25% of its loan value.
- Exempt: credit life, group coverage, and contractual conversions with the same insurer.
- The agent:
- presents the Notice Regarding Replacement no later than when the application is taken
- has the applicant and agent sign it
- leaves a copy with the applicant and sends one with the application
- The replacing insurer:
- notifies each existing insurer within 7 working days
- gives an unconditional 20-day right to return the new policy for a refund
- keeps replacement records three years or until the next examination, whichever is earlier
- The existing insurer, if it tries to save the business, sends the owner a policy summary within 20 days.
Solicitation and illustrations
- Before the sales presentation, the agent states that he or she is a life insurance agent and names the insurer (Reg. 1203). Titles such as "financial planner" can't be used to suggest an advisory business that doesn't exist.
- Buyer's Guide and Policy Summary are delivered before the sale. If the policy has an unconditional refund provision of at least 10 days, they may be delivered with the policy instead (Reg. 1203-5).
- Lapse-supported illustrations are prohibited (Reg. 1210).
- If the policy is issued differently from the one illustrated, a signed "Revised Illustration" goes with it.
- Owners of illustrated policies get an annual report.
Exam traps
- Delaware allows reinstatement for 3 years and backdating up to 1 year. The suicide exclusion can last 2 years.
- The replacement free look is 20 days, and the existing insurer is notified within 7 working days.
- Incontestability exceptions are nonpayment plus optional disability and accidental death. There is no fraud exception.
Practice Life Policy Provisions Options and Riders questions All Life, Accident & Health topics
Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.
