Free Life Policy Provisions Options and Riders Study Guide
Michigan 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 Michigan writes them into law. Individual life provisions are in chapter 40 of the Insurance Code (MCL 500.4004–4046), and group life is in chapter 44.
Required provisions in an individual life policy
| Provision | Michigan rule |
|---|---|
| Entire contract | The policy contains the entire contract. Nothing is incorporated by reference unless endorsed on or attached when issued (4004). |
| Grace period | 1 month for every premium after the first year. The policy stays in force, and an interest charge may apply. If the insured dies during the grace period, the overdue premium may be deducted from the settlement (4012(a)). |
| Lapse notice | Written notice to the owner's last known address at least 30 days before coverage ends (4012(b)) |
| Free look | A front-page notice gives at least 10 days after receipt to cancel for a prompt refund (4015) |
| Incontestability | Incontestable after 2 years in force during the insured's lifetime. The only exceptions are nonpayment and violations of policy conditions on military or naval service in wartime (4014). There is no fraud exception in the statute. |
| Representations | Absent fraud, the applicant's statements are representations, not warranties. A statement can't void the policy unless it's in a written application attached to the policy (4016). |
| Misstatement of age or sex | Benefits are adjusted to what the premium or most recent mortality charge would buy at the correct age or sex (4018) |
| Dividends (participating policies) | Participation must begin no later than the end of the 5th policy year. The owner must be able to take dividends in cash (4020). |
| Policy loans | Available after 3 full years of premium, on proper assignment. Not required in term policies (4022). |
| Forfeiture for unpaid loans | Not until at least 1 month after notice is mailed to the insured and any assignee (4022, 4046) |
| Nonforfeiture | Required cash surrender values and options: cash, reduced paid-up and extended term (4024, 4060) |
| Reinstatement | Within 3 years of default, with evidence of insurability and back premium with interest (4028) |
| Settlement | On receipt of due proof of death, and no later than 2 months after (4030) |
Permitted limits and prohibited provisions
- Aviation and military exclusions: the policy may limit liability for death from aviation (other than as a fare-paying passenger on a scheduled route) or from military or naval service. The reduced amount can't be less than the reserve, minus any loan (4042).
- Suits: a policy can't shorten the time to sue to less than 6 years after the claim arises (4046(2)).
- Backdating: a policy can't take effect more than 6 months before the application if that lowers the premium below the rate for the insured's age at application (4046(3)).
Consent and insurable interest
- A policy of $10,000 or more needs the written consent of the person insured. Signing the application counts as consent. The rule doesn't apply when the insured is under 18 (2211).
- Creditor protection: proceeds and cash values payable to the insured's spouse or children are exempt from the insured's creditors (2207).
Universal life (4037, 4038)
- Universal life has separately identified interest credits and mortality and expense charges (4001).
- The owner gets an annual report at no charge. It shows values, charges, the death benefit, surrender value and loans.
- Grace period: at least 30 days after the net cash surrender value first reaches zero.
- A statement of policy information is delivered within 15 working days after the application, and at least 5 days before the policy. If the policy arrives sooner, the free look extends to 15 days.
Group life (chapter 44)
| Rule | Michigan figure |
|---|---|
| Minimum group | At least 2 employees, with or without medical exams. Amounts must be set by a plan that precludes individual selection (4404). |
| Incontestability | 2 years from issue, except nonpayment and wartime military service violations (4432) |
| Conversion | Apply within 31 days of termination with no evidence of insurability. Any form the insurer customarily issues except term, at attained age (4438) |
| Dependent child | Includes biological, adopted, step or foster children who depend on the employee (4426) |
Guaranty protection
Up to $300,000 in death benefits and $100,000 in cash value per life. A single owner of multiple policies is capped at $5,000,000 (MCL 500.7704).
Common exam traps
- Grace period: 1 month, after the first year. Lapse notice: 30 days.
- Incontestable after 2 years. The only exceptions are nonpayment and wartime military violations.
- Dividends begin by the 5th year. Loans after 3 years. Reinstatement within 3 years.
- Life free look: 10 days. Universal life free look extends to 15 if the policy arrives early.
- Written consent is required for policies of $10,000+, except on minors under 18.
- A policy can't limit the time to sue to less than 6 years.
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.
