The standard life policy provisions, nonforfeiture and dividend options, settlement options, and riders are covered in the national Life Policy Provisions guide. Kentucky writes its required life provisions into Subtitle 15 of KRS Chapter 304, its group life rules into Subtitle 16, and its replacement rules into KRS 304.12-030 and 806 KAR 12:080. Use the Kentucky numbers below on state questions.

Required provisions (individual life)

Incontestability has no fraud exception. Kentucky's statute lists only nonpayment and the optional disability and accidental death exceptions. Incontestability doesn't stop an insurer from applying a valid exclusion, such as aviation (304.15-170).

Reinstated policies. A reinstated policy may be contested for fraud or misrepresentation in the reinstatement application only for the same period as at original issue (304.15-270).

Permitted exclusions and the suicide clause (304.15-260)

A Kentucky life policy may exclude death only from:

• war or military service
• aviation
• specified hazardous occupations
• residence outside the continental U.S. and Canada
• suicide, sane or insane, within two years of issue

It may not exclude death from an illness diagnosed after issue. A policy that uses the suicide exclusion must still pay at least the reserve (304.15-260(2)). A policy may not limit the time to sue to less than three years after the cause of action accrues.

Prohibited provisions (304.15-280)

A Kentucky life policy may not:

• take effect more than one year before the application was made
• make the soliciting agent the agent of the insured
• pay benefits in goods, services or merchandise

Replacement (KRS 304.12-030; 806 KAR 12:080)

Agent's duties:

• Get a signed statement on whether the applicant has existing policies or annuities. If the answer is "none," the agent's replacement duties are complete.
• In a replacement, present and read the replacement notice (Office Form A) no later than when the application is taken, have the applicant and agent sign it, and leave a copy with the applicant.
• Leave the original or a copy of all sales material used.

Replacing insurer's duties:

• notify the existing insurer within five business days
• give the owner 30 days after delivery to return the new policy or annuity for an unconditional full refund
• agree that the new policy is contestable no more than the old one would have been, up to the old face amount; the credit extends to the suicide period

Exempt replacements include existing nonconvertible, nonrenewable term with five years or less to run, credit life, and certain group and plan-funded contracts.

Group life (Subtitle 16)

• Association groups need at least 100 members at the outset, at least two years of existence, and a purpose other than getting insurance (304.16-080).
• A noncontributory employer plan must insure all eligible employees except those who reject coverage in writing (304.16-030).
• The grace period is 31 days (304.16-120).
• Incontestability. A statement about an individual's insurability can't be used after two years, and only if it is in a written instrument the person signed (304.16-130).
• Conversion when employment ends (304.16-190, -210). The employee may convert to an individual policy, other than term, without evidence of insurability by applying within 31 days. If the person dies during that 31 days, the convertible amount is paid as a group claim.
• Conversion when the group policy ends (304.16-200). Only people insured for five years may convert, and the amount may be capped at $10,000.

Beneficiaries and creditors

• Retained asset accounts (304.12-035). Before proceeds go into one, the beneficiary must be told of the right to a lump-sum payment.
• Creditors (304.14-300). Proceeds payable to a beneficiary other than the insured are protected from the insured's creditors, except for premiums paid with intent to defraud them.

Common exam traps

• The grace period is 30 days (31 for group life). The free look is 10 days, or 30 on a replacement.
• Incontestability runs two years, with no fraud exception.
• A suicide exclusion is limited to two years and must pay at least the reserve.
• A policy may be backdated one year at most.
• Reinstatement is available for three years. Loans become available after three years of premiums, with an 8% fixed cap.
• The replacing insurer notifies the existing insurer within five business days, and the agent reads Form A to the applicant.
• The group life conversion window is 31 days.