The national guide covers the standard life policy provisions, nonforfeiture, dividend and settlement options, and riders. Illinois puts its rules in several places:

• Required provisions: 215 ILCS 5/224.
• Prohibited provisions: 215 ILCS 5/225.
• Solicitation and buyer's guide: 50 Ill. Adm. Code 930.
• Replacement: 50 Ill. Adm. Code 917.
• Illustrations: 50 Ill. Adm. Code 1406.
• Accelerated benefits: 50 Ill. Adm. Code 1407.

National concepts in brief

• Nonforfeiture options: cash surrender, reduced paid-up and extended term.
• Dividend options: cash, reduce premium, accumulate at interest, and paid-up additions.
• Accelerated death benefit: pays part of the death benefit early when the insured is terminally ill.

Required provisions (215 ILCS 5/224)

Prohibited provisions (215 ILCS 5/225)

• Backdating more than 6 months before the application date.
• Limiting the time to sue to less than 3 years after the claim accrues.
• Making the soliciting agent the agent of the insured.

Replacement (50 Ill. Adm. Code 917; 215 ILCS 5/224(2))

What counts as a replacement:

• converting existing coverage to reduced paid-up or extended term;
• borrowing more than 25% of the loan value.

Exempt transactions:

• credit life;
• group life and group annuities;
• transactions with total cash value under $500 and face amounts under $5,000.

Duties:

• Producer: presents the Notice Regarding Replacement no later than when the application is taken.
• Replacing insurer:
  • sends the notice to the existing insurer within 3 working days;
  • either delays issue 20 days or gives a 20-day unconditional refund right after delivery;
  • keeps notices for 3 years.

Churning means replacing a policy using its own values mainly to earn a new commission. It is prohibited.

Solicitation, illustrations and accelerated benefits

Solicitation (50 Ill. Adm. Code 930):

• The Buyer's Guide is given before the initial premium is accepted. For direct response sales, it comes with or before delivery.
• The Policy Summary is given with or before delivery.
• The agent identifies as a life insurance agent and names the insurer.
• Any mention of dividends must say they aren't guaranteed.
• "Financial planner"-type titles can't be used to imply the agent isn't paid by sales.
• Preneed policies can't be owned by a funeral home or producer whose only interest is receiving the proceeds.

Illustrations (50 Ill. Adm. Code 1406):

• Illustrations are labeled "Life Insurance Illustration."
• "Vanishing premium" wording is banned.
• If the policy differs from the illustration, a Revised Illustration is signed by delivery.
• If no illustration was used, the producer certifies that in writing.

Accelerated benefits (50 Ill. Adm. Code 1407):

• Terminal illness means death expected within 24 months.
• Proceeds may be used for anything, and a lump sum must be offered.
• These products may not be marketed as long-term care.

STOLI is illegal (215 ILCS 159/50).

Common exam traps

• Interest on late death claims is 10% in Illinois. It runs from the date of death unless the claim is paid within 31 days.
• The free look is 10 days, but a replacement gets 20 days.
• Policy loans become available after 3 years. The nonforfeiture table must cover at least 20 years.
• A policy may not be backdated more than 6 months.
• The replacing insurer notifies the existing insurer within 3 working days.