Free Life Policy Provisions Options and Riders Study Guide
Minnesota 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 Minnesota writes them into law. Required individual life provisions are in Minn. Stat. 61A.03, prohibited provisions in 61A.07, the right to cancel in 72A.51–72A.52, and group life in 61A.09 and 61A.092.
Required provisions (Minn. Stat. 61A.03)
| Provision | Minnesota rule |
|---|---|
| Grace period | 1 month, with coverage continuing. Overdue premium may be deducted if the insured dies during the grace period (subd. 1(b)). |
| Incontestability | Incontestable after 2 years in force during the insured's lifetime. The only exceptions are nonpayment and wartime military service conditions. Fraud is not an exception (subd. 1(c)). |
| Entire contract; representations | Absent fraud, the insured's statements are representations, not warranties. No statement voids the policy unless it's in a written application that is attached when issued (subd. 1(d)). |
| Dividends | Divisible surplus is determined annually, starting no later than the end of the 3rd policy year (subd. 1(f)) |
| Policy loans | Available after 3 full years of premium. Not required in term insurance. Except for loans to pay premium, a loan may be deferred up to 6 months (subd. 1(g)). Loan interest is either a fixed maximum of 8% a year or an adjustable maximum rate (subd. 2). |
| Reinstatement | Within 3 years of default, with evidence of insurability and back premium with interest (subd. 1(h)) |
| Settlement | Within 2 months of receiving due proof of death (subd. 1(i)) |
| Form numbers | A form number appears in the lower left corner of the first page of each form, rider and endorsement (subd. 1(l)) |
Prohibited provisions (61A.07)
- forfeiture for an unpaid loan until at least 1 month after notice to the insured and any assignee
- limiting the time to sue to less than 5 years
- backdating more than 6 months before the application
Right to cancel (72A.51, 72A.52)
- The buyer of an individual life policy may cancel until midnight of the 10th day after receiving the policy.
- A mailed notice is effective when postmarked.
- The refund of the entire premium is due within 10 days, and the policy is void from the start.
- The right can't be waived.
- Replacement policies get at least 30 days.
- The notice must be in 10-point bold type. If it's missing, the buyer may cancel within 1 year.
Replacement (61A.53–61A.60)
- Replacement means an existing policy is lapsed, surrendered or otherwise ended in connection with a new purchase. It includes borrowing more than 25% of the existing policy's loan value.
- Conservation is the existing insurer's attempt to talk the owner out of replacing.
- Credit life and group life are exempt (61A.54).
- The agent's duties (61A.55):
- Collect signed statements from the applicant and the agent on whether replacement is involved.
- Present the completed notice regarding replacement, signed by both, no later than when the application is taken.
- Leave the notice with the applicant.
- The notice warns that the incontestable and suicide periods start over (61A.60).
- The replacing insurer (61A.57):
- Sends notice to the existing insurer within 5 working days.
- Keeps a replacement register for 6 years.
- Gives a 30-day refund period.
Beneficiaries and creditors
- Spendthrift clause: the beneficiary can't commute, assign or borrow against installments. The proceeds held by the insurer are beyond the beneficiary's creditors (61A.04).
- Beneficiaries take proceeds free of the insured's creditors. Premiums paid in fraud of creditors may be recovered if the insurer is notified before payment (61A.12).
- A beneficiary may be changed if the beneficiary consents, the right was reserved, the beneficiary has died, or the marriage was dissolved.
Insurable interest and STOLI (60A.0783–60A.0789)
- Insurable interest must exist when the policy is issued. Close relatives by blood or law have an interest based on love and affection.
- STOLI is prohibited, as is promoting a policy for later sale. Settlements in the first 4 years are barred unless the buyer confirms no STOLI is involved. Prohibited arrangements are voidable.
- A rejected applicant may ask for the reasons in writing (72A.12).
Group life
| Rule | Minnesota figure |
|---|---|
| Conversion | Apply within 31 days of termination. Any form the insurer customarily issues except term. Death within the 31 days is covered (61A.09). |
| Continuation after termination or layoff | Up to 18 months, or until other group coverage, at no more than 102% of the cost. The employer gives notice within 14 days, and the employee has 60 days to elect. It doesn't apply to discharge for gross misconduct. A conversion right follows (61A.092). |
| Settlement options | For group proceeds of $15,000 or more, alternative payment methods are offered on request |
Credit life (chapter 62B)
- Credit life must be term insurance.
- The amount can't exceed the debt plus one monthly payment.
- It's cancelled with a premium refund when the debt is paid off early.
Guaranty protection
Up to $500,000 in death benefits and $130,000 in cash value (61B.19).
Common exam traps
- Grace period: 1 month. Incontestable after 2 years, with no fraud exception.
- Loans after 3 years, with interest up to 8% fixed. Reinstatement within 3 years. Settlement within 2 months.
- A policy can't shorten the time to sue below 5 years.
- Right to cancel: 10 days, or 30 for a replacement. A missing notice gives 1 year.
- Group life continuation: 18 months, 102%, 60 days to elect.
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.
