How life policy provisions, nonforfeiture options, dividend and settlement options and riders work in general is covered in the national Life Policy Provisions, Options and Riders guide. Montana writes many required life provisions into statute, in Mont. Code Ann. 33-20-101 and following. It also regulates life sales through the solicitation, illustration and replacement rules in ARM 6.6.201 to 6.6.713. The Montana versions differ from the textbook model in a few places the exam likes to test, so learn these exact figures.

Required provisions (Title 33, chapter 20, part 1)

Reinstatement isn't required if the policy was surrendered for cash, the cash value is exhausted, or the extended term insurance has expired.

These standard provisions don't apply to annuities, which have their own provisions in part 3 (33-20-103).

Exclusions allowed in a Montana life policy (33-20-121)

Montana permits only these exclusions:

• war or military action
• aviation
• specified hazardous occupations
• residence outside the continental United States and Canada
• suicide within 2 years of the issue date

If death happens under a permitted exclusion, the insurer must still pay at least the policy reserve. An exclusion for death from a preexisting illness isn't allowed.

Lapse notices (33-20-141)

• Before an individual life policy is canceled for nonpayment, the insurer sends a notice. The cancellation date must be at least 30 days after mailing. That period runs at the same time as the grace period.
• At application, the applicant must be told of the right to name a third party to receive a copy of any lapse notice.

Life solicitation and illustrations

• Disclosure (ARM 6.6.205):
  • Before a sales presentation, the agent must say they're acting as a life insurance agent and give the full name of the insurer.
  • Terms like "financial planner" or "investment advisor" can't be used to suggest a fee-only advisory business when the agent is paid from sales.
• Buyer's Guide and policy summary (ARM 6.6.206):
  • Normally given before the initial premium is accepted.
  • If the policy has an unconditional refund provision of at least 10 days, they may be given with or before policy delivery.
  • The rule doesn't apply to annuities, credit life, group life, ERISA plan policies or variable life (ARM 6.6.203).
• Illustrations (ARM 6.6.705, 6.6.713):
  • If a basic illustration is used and the policy is applied for as illustrated, a signed copy goes to the insurer with the application, and a copy goes to the applicant.
  • A form the insurer marketed without an illustration can't be illustrated before the first policy anniversary.

Replacement (ARM 6.6.301 to 6.6.309)

The rule exists so buyers have the information to decide in their own best interest.

What counts as a replacement

• An existing policy is lapsed, surrendered, converted to reduced paid-up or extended term, or reduced by using its nonforfeiture values.
• Existing values are used to finance the new purchase. Use of values within 4 months before or 13 months after the new policy date is evidence of a financed purchase.

Exempt from the rule: credit life, and existing non-convertible, non-renewable term that expires within 5 years, among others.

Producer's duties (6.6.305)

1. Submit a statement signed by the applicant and producer about existing coverage. If the answer is no, the producer's replacement duties are done.
2. If it's a replacement, present and read the replacement notice no later than when the application is taken, have it signed by both, and leave it with the applicant.
3. Leave copies of all sales material used, when the application is completed.

Insurers' duties

• The replacing insurer notifies each existing insurer within 5 business days. It tells the owner of the right to return the new policy within 30 days of delivery for a full refund (6.6.306).
• The existing insurer keeps replacement notices at least 5 years or until its next examination, whichever is later (6.6.308).

Violations (6.6.309)

• Telling an applicant to answer "no" to avoid notice to the existing insurer is a listed violation.
• A pattern of clients who deny replacement and then replace is evidence the producer knew.
• Any violation of the rule is treated as twisting under 33-18-204.

Common exam traps

• Montana's incontestable clause excepts only nonpayment. There's no fraud exception.
• The suicide exclusion lasts 2 years, and the insurer still owes at least the reserve.
• Reinstatement is available for 3 years, with interest on arrears capped at 6%.
• Death claims: paid within 60 days, with interest from day 30.
• In a replacement, the producer gets the signed statement and leaves sales material. The replacing insurer notifies the existing insurer within 5 business days. The replacement refund period is 30 days.