The general provisions, nonforfeiture options, dividend and settlement options, and riders are covered in the national Life Policy Provisions guide. Kansas puts its required life policy provisions in K.S.A. 40-420, lists prohibited provisions in 40-421, and regulates the free look, replacement and accelerated benefits by regulation. Where the national guide describes a typical provision, use the Kansas numbers below.

Required provisions (K.S.A. 40-420)

Incontestability has no fraud exception. The Kansas statute lists only nonpayment and the military, aviation, and disability or accidental death provisions. A reinstated policy can be contested only for fraud or material misrepresentation in the reinstatement application, and only for the same period as at original issue.

Notice before lapse (40-410). Within six months after a premium default, an insurer may not cancel for nonpayment without first sending the owner written notice of its intention. Policies with weekly, biweekly or monthly premiums and a grace period of at least four weeks are exempt.

Prohibited provisions (K.S.A. 40-421)

A Kansas life policy may not:

• take effect more than six months before the application was made
• forfeit the policy for failure to repay a loan while total indebtedness is less than the loan value
• make the soliciting agent the agent of the insured, or bind the insured to the agent's statements
• defer dividends on a participating policy for more than five years

Policy loan interest (K.S.A. 40-420c)

The policy may use either of two maximum rates:

• a fixed maximum of no more than 8% a year
• an adjustable maximum, set at least every 12 months but not more often than every three months

Free look (K.A.R. 40-2-15)

• An individual life policy must let the owner return it within at least 10 days of delivery for a refund of the total premium.
• The notice must be printed on or attached to the first page.
• A returned policy is void from the start.
• For variable contracts, the refund is any premium not allocated to separate accounts plus the value of the separate account amounts on the day the returned policy is received.

Replacement (K.A.R. 40-2-12)

What counts as replacement. Existing coverage is lapsed, surrendered, converted to reduced paid-up or extended term, reduced, or subject to substantial borrowing, meaning more than 50% of the tabular cash value.

Exempt from the rule:

• group life
• conversions and contractual changes with the same insurer
• qualified plans
• certain direct-mail sales
• replacement of nonconvertible, nonrenewable term with five years or less left

Agent's duties:

• Every application includes the applicant's signed statement on whether the policy replaces existing coverage.
• In a replacement, the agent lists the policies being replaced and their insurers.
• The agent presents the Notice to Applicants Regarding Replacement of Life Insurance and the sales proposals used, and leaves copies with the applicant.

Replacing insurer's duties:

• notify each existing insurer within three working days
• delay issue 20 days, unless the policy gives an unconditional 20-day right to a full refund after delivery
• keep the proposals and notice for three years or until the next exam, whichever is later
• not contest the new policy, up to the replaced amount, any more than the old policy could have been contested

Agents with securities licenses. An agent who recommends a securities transaction requiring surrender of a life policy gives a dated, signed written notice first.

Violations. Any violation of the replacement regulation is presumed to be a misleading representation, which is twisting (40-2-12(k)).

Accelerated benefits (K.A.R. 40-2-20)

• Every accelerated benefit contract must include a terminal condition with a life expectancy of 24 months or less as a qualifying event.
• A chronic illness trigger may not require inability to perform more than two activities of daily living.
• Use of the proceeds may not be restricted, and a lump-sum option must be offered.
• Any elimination period for confinement or chronic illness may not exceed 90 days.
• The disclosure must warn that the benefit may be taxable and may affect Medicaid eligibility.
• The rider may not be marketed as long-term care insurance.

Paying the claim

• Interest on proceeds (40-447). If proceeds aren't paid within 10 days of due proof of death, interest runs from the date proof was received.
• Creditor protection (40-414). Proceeds payable to a beneficiary with an insurable interest are generally free from the insured's creditors. Nonforfeiture values lose that protection if bankruptcy is filed within one year after the policy was issued.
• Testamentary trustee (40-441). If a trustee named in a will doesn't claim the proceeds within one year of death, the insurer pays those next entitled.

Common exam traps

• Kansas's grace period is 30 days.
• Incontestability runs two years, and Kansas lists no fraud exception.
• Reinstatement is available for three years, with interest capped at 6%.
• Policy loans are required after three years of premiums. The fixed loan rate cap is 8%.
• The life free look is 10 days; the LTC free look is 30.
• The replacing insurer notifies the old insurer within three working days.
• Accelerated benefits require a terminal trigger of 24 months or less.