Consumer Frequently Asked Questions

Life Insurance

Is there a period of time during which after I purchase my life insurance policy I can change my mind and have my money refunded?

Answer: Yes, the Insurance Law requires a “free look” period of not less than ten days nor more than 30 days from the date the policy is delivered to you. A policy sold by mail order must provide for a 30 day period, and a policy sold in a replacement situation must provide for a 60 day period. The insurer must refund to you any premium paid, including any policy fees or charges.

What happens if I forget to pay my premium by its due date?

Answer: For scheduled premium policies, the policy will provide for a 31 day or one month grace period within which you can still make your premium payment. Your policy will continue in force during that time.  For policies in which the amount and frequency of premiums may vary, the policy must provide a grace period of 61 days.

If I pay my annual premium and then decide to cancel my policy, will I receive a pro rata refund of my premium?

Answer: An insurer is not required under the Insurance Law to refund any portion of your annual premium if you choose to cancel your policy during the year.   However, if cash values have accumulated under the policy, you would be entitled to the cash surrender value.

What if I made a mistake in completing my application for a life insurance policy? Can the insurer void my policy?

Answer: A life insurance policy will be incontestable by the insurer after being in force during the life of the insured for a period of two years from its date of issue.   The company may only contest coverage based on a material misrepresentation in the application.     A misrepresentation is deemed material if knowledge by the insurer of the facts misrepresented would have led to a refusal of coverage.  A misstatement of age or sex is not a material misstatement and not subject to the two year contestable period.  If the age or sex of the insured is misstated, any amount payable or benefit accruing will be what the premium would have purchased at the correct age or sex.

If I forget to pay my premium and the policy lapses is there anything I can do?

Answer: For scheduled premium policies, the policy must provide for reinstatement of the policy within three years from date of default, unless the cash surrender value has been exhausted or the period of extended insurance has expired.  In order to reinstate the policy, you must complete a reinstatement application and provide evidence of good health to the satisfaction of the insurer. In addition, you will be required to pay all the overdue premiums with interest (not to exceed 6%) and repay or reinstate any outstanding loans at the applicable policy loan interest rate.   This reinstatement right is not required for polices in which the owner may vary the amount and frequency of premium payments.

If I take out a policy loan, what rate of interest can the insurer charge?

Answer: At the option of the insurer your policy will provide for either: 1) a fixed loan interest rate not to exceed 7.4% (payable in advance) or 8% (payable in arrears); 2) an adjustable rate subject to an 8% cap; or 3) an adjustable rate with no cap not to exceed the higher of:  a) the Monthly Average Corporates yield shown in Moody"s Corporate Bond Yield Averages for the calendar month ending two months before the date on which the rate is determined; and b)  the rate used to compute the cash surrender values under the policy during the applicable period plus one percent. 

What happens to a life insurance policy in the event of suicide of the insured?

Answer: If the insured dies by suicide during the first two policy years, the insurer will refund the premiums paid less dividends paid and less any indebtedness, including interest due and accrued.  The face amount will not be payable.   If the policy was issued as a result of a conversion from another policy, the two year suicide period runs from the issue date of the original policy.

What happens if my outstanding loans plus interest due exceed the policy loan value on my life insurance policy?           

Answer: The insurer will provide you with at least 30 days notice before terminating your policy. During that 30 day period you have the opportunity to repay the outstanding loan and/or interest in order to avoid lapse.

In order to purchase life insurance I am told I must have an "insurable interest" in the person to be insured. What is "insurable interest"?

Answer: The Insurance law defines "insurable interest" as, in the case of persons closely related by blood or by law, a substantial interest engendered by love and affection. In the case of other persons, a lawful and substantial economic interest in the continued life, health or bodily safety of the person insured, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the insured.   

If there is a delay in an insurer paying the death benefit to the beneficiary when a death claim is made, is the beneficiary entitled to any interest on the death benefit?

Answer: Yes. The Insurance Law requires that interest, computed daily at the rate of interest currently paid by the insurer on proceeds left under the interest settlement option, be paid from date of death to date of claim.   The timeframe for paying the death benefit must be reasonable.