SUBPART B. INDIVIDUAL LIFE

§931. Life insurance policies; standard provisions

A. No policy of life insurance, except as stated in Subsection C of this Section, shall be delivered or issued for delivery in this state unless it contains in substance the following provision or provisions which, in the opinion of the commissioner of insurance, are more favorable to the policyholder:

(1) Grace period. A provision that the insured is entitled to a grace period either of thirty days or, at the option of the insurer, of one month within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force, but if a claim arises under the policy during the period of grace before the overdue premiums or the deferred premiums of the current policy year, if any, are paid, the amount of such premiums, together with interest, not in excess of six percent per annum, on any overdue premium, may be deducted from any amount payable under the policy in settlement.

(2) Incontestability. A provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years from its date of issue, except for nonpayment of premiums and except for the conditions of the policy relating to military or naval service, or services auxiliary thereto; and at the option of the insurer, provisions relating to benefits in the event of disability, as defined in the policy, and provisions which grant additional insurance specifically against death by accident or accidental means, may also be excepted.

(3) Entire contract. A provision that the policy shall constitute the entire contract between the parties, or if a copy of the application is endorsed upon or attached to the policy when issued, a provision that the policy and the application therefor shall constitute the entire contract between the parties.

(4) Misstatement of age. A provision that if the age of the person insured or the age of any other person whose age is considered in determining the premiums has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age, or ages.

(5) Participating policy. If the policy is a participating policy, a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the policy.

(6) Nonforfeiture options. A provision in accordance with R.S. 22:934 through 936 specifying the options, if any, available under the policy in the event of default in a premium payment; however, the mortality table and rate of interest used as a basis for the calculation of the options shall be designated by the policy.

(7) Policy loan. A provision that when the policy has a loan value, the insurer issuing it shall advance at the option of the person entitled thereto, a sum equal to or less than the cash surrender value of the policy at the end of the current policy year computed in accordance with the provisions of this Subpart, at any time while the policy is in force, on proper assignment or pledge of the policy or with the policy as security at a specified rate of interest not exceeding eight percent per annum on policy contracts in effect prior to September 10, 1982, or in accordance with the provisions of R.S. 22:932 on policy contracts in effect on or after September 10, 1982. The interest shall be compounded annually payable in advance. The policy shall also contain a provision that the insurer may deduct from the loan value, in addition to the indebtedness deducted in determining such value, any unpaid balance of the premium for the current policy year. The policy shall also contain a provision that, if the loan is made or repaid on a date other than the anniversary of the policy, the insurer may collect interest for the portion of the current policy year on a pro rata basis at the rate of interest specified in the policy. The policy may further provide that interest on the loan may be compounded annually and, if not paid when due, it shall be added to the existing loan and shall bear interest at the same rate. The policy may further provide that, if and when the total indebtedness on the policy, including interest due or accrued, equals, or exceeds the amount of the loan value thereof at such time, and if at least thirty days prior notice has been given in the manner provided in R.S. 22:905, then the policy shall terminate and become void. The insurer may provide in the policy that the making of any such loan, except when made to pay premiums, may be deferred for a period not to exceed six months after the application therefor has been received by it. The provision shall not apply to term policies of twenty years or less.

(8) Nonforfeiture benefits. A provision specifying the basis used in determining nonforfeiture benefits. In case the proceeds of the policy are payable in installments or as an annuity, a table showing the amounts of the installments or annuity payments.

(9) Reinstatement. A provision that the policy will be reinstated at any time within three years from the date of default, unless the cash surrender value has been exhausted by payment or unless the period of extended insurance has expired, upon the application of the insured and the production of evidence of insurability, including good health, satisfactory to the insurer and the payment of all overdue premiums and the payment or reinstatement of any other indebtedness to the insurer upon such policy with the interest at a rate not exceeding six percent per annum compounded annually.

(10)(a) Free look period. A provision, prominently printed on the life insurance policy or attached thereto, notifying the insured that ten days are allowedfrom the date of his receipt of the policy, to examine its provisions. If the policy is not as explained by the company, its representative, or as understood by the insured, the policy may be surrendered within the ten-day period, and any premium advanced by the insured, upon the surrender, shall be immediately returned to him. The insurer shall have the option of printing, attaching, or endorsing the notice required in this Subparagraph or a notice of equal prominence which, in the opinion of the commissioner of insurance, is not less favorable to the policyholder. This Subparagraph shall not apply to travel insurance policies which by their terms are not renewable.

(b) If the policy is delivered by a producer, a receipt shall be signed by the policyholder acknowledging delivery of the policy. The receipt shall contain the policy number and the date the delivery was completed. All delivery receipts required by this Subparagraph shall be retained by the insurer or its producer for two consecutive years. The requirement of this Subparagraph shall not apply to any insurer that markets policies under a home service marketing distribution method and that issues a majority of its policies on a weekly or monthly basis.

(c) If the policy is delivered by mail, it shall be sent by certified mail, return receipt requested, or a certificate of mailing shall be obtained showing the date the policy was mailed to the policyowner. For policy issuances verified by a certificate of mailing, it is presumed that the policy is received by the policyowner ten days from the date of mailing. The receipts and the certificate of mailing described in this Section shall be retained by the insurer or producer for two years.

(11) Lump sum payment. A provision which allows election by the beneficiary of an option to receive benefits in the form of a lump sum payment. This Paragraph shall not apply to policies of industrial life insurance or service insurance.

(12) Conversion notice. (a) A provision requiring that the insurer notify the policyholder of his option to convert his policy from term life insurance to permanent life insurance at least thirty-one days prior to the expiration of the conversion option, if such an option is applicable. Such notice shall be a separate notice or contained in either a premium notice or an annual premium summary.

(b) Evidence of a business procedure or practice to provide the required notice by mailing the notice to the policyholder at the address shown in the policy shall be sufficient to prove that the required notice was provided.

(c) This Paragraph shall not apply to a policyholder who is covered under a child term rider.

B. Exclusions and restrictions. No policy of life insurance delivered or issued for delivery in this state shall contain any provision which excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status, except the following provisions, or provisions which in the opinion of the commissioner of insurance are substantially the same or more favorable to policyholders:

(1) Provisions excluding or restricting coverage in the event of death occurring:

(a) As a result of war declared or undeclared under conditions specified in the policy.

(b) While either in:

(i) The military, naval, or air forces of any country at war, declared or undeclared.

(ii) Any ambulance, medical, hospital, or civilian noncombatant unit serving with such forces, either while serving with or within six months after termination of service in such forces or units.

(c) As a result of self-destruction while sane or insane within two years from the date of issue of the policy.

(d) As a result of aviation under conditions specified in the policy.

(e) Within two years from the date of issue of the policy as a result of a specified hazardous occupation or occupations, or while the insured is residing in a specified foreign country or countries.

(2) In the event of death as to which there is an exclusion or restriction pursuant to Subparagraph (1)(a), (c), (d), or (e) of this Subsection, the insurer shall pay an amount not less than the reserve on the face amount of the policy, together with the reserve for any paid-up additions thereto, and any dividends standing to the credit of the policy, less any indebtedness to insurer on the policy, including interest due or accrued.

(3) In the event of death as to which there is an exclusion or restriction pursuant to Subparagraph (1)(b) of this Subsection, the insurer shall pay the greater of:

(i) The amount specified in Paragraph (2) of this Subsection.

(ii) The amount of the gross premiums charged on the policy less dividends paid in cash or used in the payment of premiums thereon and less any indebtedness to the insurer on the policy, including interest due or accrued.

(4) A clause in any policy of life insurance, issued under this Code, providing that such policy shall be incontestable after a specified period shall preclude only a contest of the validity of the policy, and shall not preclude the assertion at any time of defenses based upon provisions which exclude or restrict coverage as provided in this Subsection, whether or not such restrictions or exclusions are excepted in such clause; nor upon a provision regarding misstatement of age as provided in Paragraph (4) of Subsection A of this Section, whether or not such provision is excepted in such clause.

(5) Nothing contained in this Subsection shall apply to any provision in a life insurance policy for additional benefits in the event of death by accident or accidental means.

C. Any of the provisions or portions thereof of this Section not applicable to single premium or nonparticipating or term policies shall to that extent not be incorporated therein. The provisions of this Section shall not apply to policies of industrial life insurance, service insurance, or to policies of group life insurance.

Acts 1958, No. 125. Amended by Acts 1960, No. 169, §1; Acts 1966, No. 169, §1; Acts 1975, No. 261, §3; Acts 1981, No. 661, §1; Acts 1982, No. 465, §1; Acts 1993, No. 141, §1; Acts 2003, No. 125, §1; Redesignated from R.S. 22:170 by Acts 2008, No. 415, §1, eff. Jan. 1, 2009; Acts 2011, No. 94, §1, eff. Jan. 1, 2012; Acts 2012, No. 271, §1; Acts 2014, No. 47, §1.