Free Life Policy Provisions Options and Riders Study Guide
New Jersey Life, Accident & Health exam — Life Policy Provisions Options and Riders.
The standard life policy provisions, nonforfeiture and settlement options, dividend options and riders are explained in the national Life Policy Provisions, Options and Riders guide. This guide covers the provisions New Jersey requires in individual life policies (N.J.S.A. 17B:25) and the state's claim-payment and group life rules. Where New Jersey's wording differs from the textbook version, the New Jersey rule is what the state section tests.
Required provisions in New Jersey life policies
| Provision | New Jersey rule |
|---|---|
| Free look | At least 10 days after the policyholder receives the policy, with a prompt refund of premium, fees and charges. Doesn't apply to group insurance (N.J.S.A. 17B:25-2.1). |
| Grace period | 30 days, or at the insurer's option one month of at least 30 days (4 weeks for certain industrial policies). The insurer may charge interest of up to 6% a year for the days used. The policy stays in force, and an unpaid premium is deducted from a death claim (N.J.S.A. 17B:25-3). |
| Incontestability | Incontestable after 2 years in force during the insured's lifetime, except for nonpayment of premium. Disability and accidental death or dismemberment benefits are excluded from this requirement (N.J.S.A. 17B:25-4). |
| Entire contract | The policy and the attached application are the entire contract. Application statements are representations, not warranties, absent fraud (N.J.S.A. 17B:25-5). |
| Misstatement of age | Benefits are adjusted to what the premium would have bought at the correct age (N.J.S.A. 17B:25-6). |
| Dividends | Participating policies must apportion divisible surplus annually, starting no later than the end of the third policy year. If there's a deadline to pick another option, it must be at least 30 days after the dividend is payable, and the policy must name the automatic option (N.J.S.A. 17B:25-7). Dividends are a return of surplus and aren't guaranteed. |
| Policy loans | Available after 3 full years' premiums are paid and the policy has a cash value, on the sole security of the policy. If the loan grows to equal the loan value, the policy can end, but only after at least 30 days' notice (N.J.S.A. 17B:25-8). |
| Reinstatement | Within 3 years of the first unpaid premium (2 years for industrial policies), unless the policy was surrendered for cash or its values or extended term ran out. Requires a written application, evidence of insurability, and payment of back premiums and any loan, with interest (N.J.S.A. 17B:25-9). |
Read the incontestable clause carefully
New Jersey's statute lists only nonpayment of premium as an exception. It does not carve out fraud. On the state exam, a policy in force for 2 years during the insured's lifetime can't be contested for misstatements in the application.
Paying death claims
- Settlement is due within 60 days after the insurer receives due proof of death (and, if the insurer requires it, surrender of the policy or proof of the claimant's interest) (N.J.S.A. 17B:25-11a).
- If a claim needs more investigation or is denied, the claimant must be told in writing, with the reason, by the 45th day after the insurer receives the proof (N.J.S.A. 17B:25-11b).
- The insurer then pays or denies by the 90th day after receiving the information it requested (N.J.S.A. 17B:25-11c).
Accelerated benefits
New Jersey regulates accelerated (living) benefits by rule (N.J.A.C. 11:4-30). These benefits pay part of the face amount to an insured who is terminally ill, reducing the death benefit.
Group life provisions
New Jersey's group life rules (N.J.S.A. 17B:27-68 to -75) are covered in the New Jersey Types of Life Insurance Policies guide: the 31-day grace period, 2-year incontestability, the 31-day conversion right and the 60-day claim deadline.
Common exam traps
- Grace period: 30 days or one month of at least 30 days. Interest on a late premium is optional for the insurer and capped at 6%.
- Incontestability: 2 years, measured during the insured's lifetime, with nonpayment as the only exception.
- Policy loans must be available after 3 full years of premiums, not from the first year.
- Reinstatement window is 3 years, and evidence of insurability is required.
- Death claims: 60 days to settle, written notice by day 45 if investigating, and a decision by day 90.
- Free look of 10 days for individual life policies, counted from the date the policyholder receives the policy.
Practice Life Policy Provisions Options and Riders questions All Life, Accident & Health 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.
