Free Life Policy Provisions Options and Riders Study Guide
Maine Life exam — Life Policy Provisions Options and Riders.
The national guide explains the standard life policy provisions, nonforfeiture and dividend options, settlement options and riders. This guide covers how Maine writes them into law. Required individual life provisions are in 24-A M.R.S. 2505–2516, application and insurable interest rules in 2404–2411, and group life in 2603–2630.
Required provisions in an individual life policy
| Provision | Maine rule |
|---|---|
| Grace period | 30 days, or one month of at least 30 days. The policy stays in force. Overdue premium may be deducted from the death benefit, with interest of no more than 6% a year for the days of grace used (2505). |
| Entire contract | The policy plus the application, if a copy is attached when issued (2506). An application that isn't attached can't be used against the insured (2410). |
| Incontestability | Incontestable once in force during the insured's lifetime for no more than 2 years from the date of issue. The only exceptions are nonpayment of premium and, at the insurer's option, disability and accidental death benefit provisions (2507). There is no fraud exception in the statute. |
| What incontestability doesn't bar | The clause stops challenges to the policy's validity. It doesn't stop the insurer from relying on provisions that exclude or limit coverage (2516). |
| Misstatement of age | Benefits are adjusted to what the premium would have bought at the correct age (2508). |
| Dividends (participating policies) | Surplus is apportioned annually, starting no later than the end of the 3rd policy year. The policy names the option that applies automatically. Any election period is at least 30 days (2509). |
| Policy loans | Available once 3 full years of premium are paid and there's cash value. The insurer may defer a loan, other than one to pay a premium, for up to 6 months. A policy can't terminate for excess debt until 30 days' notice is mailed to the owner and any assignee (2510). |
| Reinstatement | Within 3 years of default, with evidence of insurability and back premium. Interest on back premium is capped at 6% compounded annually (2512). |
| Claim settlement | Any settlement period is limited to 2 months from receipt of proof of death (2513, 2436). |
| Free look | The owner may return the policy within 10 days of delivery for a refund. The policy is then void from the beginning (2515-A). |
Prohibited provisions (2526):
- backdating more than 1 year before the application
- making the soliciting agent the agent of the insured
Lapse protection for seniors and the impaired (2556; Rule 585)
- The insurer must send a lapse notice at least 21 days before the grace period ends. It goes to the policyholder and to any third party the policyholder named in writing.
- The insurer sends the third-party designation form within 10 days of a request. If the form isn't returned in 30 days, the insurer may assume no designee. The owner can still name one later.
- If a policy lapses because of cognitive impairment or functional incapacity, reinstatement may be requested within 90 days.
The application and insurable interest
- Insurable interest must exist when the contract is made (2404). For close relatives by blood or law, the interest is a substantial one based on love and affection.
- Consent: the insured must apply or consent in writing. Exceptions: a spouse may insure the other spouse, and a person with an insurable interest may insure a minor (2408).
- Alterations: only the applicant may change the application, unless the applicant consents in writing. The insurer may make administrative notes only (2409).
- On request, the insurer must send the insured a copy of the application within 30 days, or it can't use the application in evidence (2410).
- Representations, not warranties: a misstatement defeats recovery only if it was fraudulent or material to accepting the risk (2411).
- STOLI: stranger-originated life insurance is a policy started for someone with no insurable interest in the insured. It is a defined prohibited practice in Maine's life settlements law (6802-A).
Accelerated benefits
Only an insurer authorized for life (or life and health) insurance may offer accelerated benefit policies (2555). Under the life settlements law, "terminally ill" means expected to die within 24 months (6802-A).
Group life
| Rule | Maine figure |
|---|---|
| Grace period | 31 days, with coverage continuing (2614) |
| Noncontributory plans | Must cover all eligible employees except those who refuse in writing (2603) |
| Conversion on leaving the group | Apply and pay the first premium within 31 days. No evidence of insurability. The new policy is a customary individual form without disability or other extra benefits (2621). |
| Conversion when the group policy ends | Available to people insured at least 5 years. The converted amount may be capped at $10,000 (2622). |
| Death during the conversion period | The convertible amount is paid as a group claim, whether or not the person applied (2623) |
| Suicide exclusion | Limited to suicide within 2 years of when coverage, or an increase, began (2630) |
Common exam traps
- Life grace period: 30 days (or one month). Group life: 31 days.
- Incontestable after 2 years from issue, with no fraud exception in the statute.
- Policy loans after 3 years. Reinstatement within 3 years. Interest on both late premium and grace-period premium is capped at 6%.
- Free look: 10 days, void from the start.
- Group conversion: 31 days. A group-termination conversion is open only to people insured 5 years and can be capped at $10,000.
- Third-party lapse notice at least 21 days before the grace period ends. Cognitive-impairment reinstatement within 90 days.
Practice Life Policy Provisions Options and Riders questions All Life 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.
