The national Life Policy Provisions guide covers the standard provisions, nonforfeiture and dividend options, settlement options and riders. This guide covers the Vermont rules: the provisions 8 V.S.A. § 3731 requires in individual life policies, death claim interest, the secondary addressee notice for older insureds, replacement rules, and sales disclosure. A replacement policy carries a 30-day right to return for a full refund.

Required provisions (8 V.S.A. § 3731)

Related rules:

• The incontestable clause bars only challenges to the policy's validity. It doesn't override provisions that exclude or restrict coverage (§ 3733).
• After reinstatement, the policy can be contested over the reinstatement application for the same period as after original issue (§ 3734(a)).
• A misstatement bars recovery only if it was fraudulent, material to the risk, or would have changed the insurer's good-faith decision to issue, rate or set coverage (§ 3736).

Paying death claims (8 V.S.A. § 3665b)

• Death proceeds are paid within 30 days after the insurer receives proof of loss.
• Interest runs from the date of death to payment. The rate is the greater of the rate paid on proceeds left on deposit or 6%.

Lapse notice for older insureds (8 V.S.A. § 3762(d))

• At application, and every year after, the insurer tells the applicant they may name a secondary addressee to receive lapse notices.
• For an individual policy on someone 64 or older that has been in force at least one year, the insurer sends notice after the grace period, at least 21 days before cancelling, to the policyholder and the secondary addressee.

Assignments and proceeds

• The insurer may deal with an assignee until it receives written notice at its home office that the assignment ended or of a conflicting claim (§ 3713(a)).
• A beneficiary other than the insured takes the proceeds free of the insured's creditors, except premiums paid to defraud creditors (§ 3706(a)).
• If the policy says so, proceeds the insurer holds can't be assigned or reached by the beneficiary's creditors (§ 3705).
• A minor at least 15 may own life insurance or annuities on their own life and can't cancel for being a minor. The policy must be payable to the minor, the minor's estate or someone with an insurable interest (§ 3710).

Accelerated LTC benefits (8 V.S.A. §§ 8091, 8092)

• A life policy that pays long-term care benefits by accelerating the death benefit comes with a policy summary at delivery. The summary explains how LTC payments reduce the death benefit.
• While benefits are being paid, the insurer sends a monthly report.

Replacement (Reg. I-2001-03)

• The producer presents and reads the replacement notice no later than when the application is taken. Both sign it, and the applicant keeps a copy.
• The replacing insurer notifies the existing insurer within five business days of receiving the application.
• The applicant has a 30-day right to return a replacement policy for a full refund.
• Using values from an existing policy to buy a new one within four months before or thirteen months after the new policy takes effect is evidence of a financed purchase, which counts as replacement.
• Nonconvertible term that expires within five years and can't be renewed is exempt.
• Telling an applicant to answer "no" to the replacement questions is a violation.
• When the replacing and existing insurers are the same or affiliated, the new policy credits time already served under the old policy's incontestable and suicide periods, up to the old face amount.

Sales disclosure (Reg. 77-2)

• An agent says, before a sales presentation, that they are a life insurance agent and names the insurer.
• An agent may not use a title like "financial planner" to suggest advisory work that isn't really done.
• Any mention of dividends says they aren't guaranteed.
• The buyer's guide and policy summary are given before the first premium is accepted. If the policy has an unconditional refund right of at least 10 days, they may come with the policy instead.

Guaranty protection

The life and health guaranty association covers up to $300,000 in death benefits and $100,000 in cash value per life, and up to $5,000,000 for one owner of several policies (8 V.S.A. § 4173(c)).

Common exam traps

• The life grace period is 30 days or one month. The A&H grace period is different (7, 10 or 31 days).
• A replacement gets a 30-day right to return. Delivering the buyer's guide with the policy, instead of before the first premium, requires a refund right of at least 10 days.
• Reinstatement is available for 3 years, with back interest capped at 6%.
• The loan rate is capped at 8% fixed. Loans may be deferred 6 months.
• Death claim interest is the greater of the deposit rate or 6%, from the date of death.
• The secondary addressee notice applies to insureds 64 or older and comes at least 21 days before cancellation.