California Life Insurance Policy Requirements

California law imposes specific requirements on life insurance policies sold in the state. These requirements protect consumers and ensure policy standardization.

Free Look Period

California provides one of the longest free look periods in the nation:

During the free look period, the policyholder can:

• Review the policy
• Return it for a full refund of premiums paid
• No questions asked, no penalty

Exam Tip: California's 30-day free look for life insurance is longer than the standard 10-day period in most states. This is a frequently tested difference.

Incontestability Clause

California requires a 2-year incontestability clause in all life insurance policies:

• After 2 years from issue, the insurer cannot contest the policy based on misstatements in the application
• Exceptions: Fraud, non-payment of premiums, or violation of policy conditions
• The clause protects beneficiaries from having claims denied due to application errors

California Specific Rules

• Incontestability period begins from the issue date, not effective date
• If policy lapses and is reinstated, a new 2-year period begins
• Does not protect against material fraud in some circumstances

Suicide Clause

California limits the suicide exclusion:

• Suicide exclusion cannot exceed 2 years from policy issue
• After 2 years, death by suicide is covered
• If policy is reinstated, new 2-year period may apply
• Accidental death benefits may have different rules

Unfair Discrimination Prohibitions

California has strong anti-discrimination laws for insurance:

Protected Classes in California Insurance

What IS Permitted

Insurers can consider:

• Age
• Health conditions
• Smoking status
• Occupation (with limitations)
• Lifestyle factors related to risk

California Specific: California is one of the few states that prohibits sex-based rate discrimination in life insurance. Many states still allow different rates for men and women.

Beneficiary Protections

California has specific beneficiary protection laws:

Death Master File Requirement

California requires insurers to:

• Cross-check policies against the Social Security Death Master File
• Locate beneficiaries when a death is identified
• Make good-faith efforts to pay death benefits
• Cannot charge fees for locating beneficiaries

Unclaimed Property

If beneficiaries cannot be found:

• Death benefits are not forfeited
• Must be reported as unclaimed property
• Escheat to the State Controller's Office
• Beneficiaries can still claim from the state

Policy Delivery Requirements

California requires:

• Policy delivered within 60 days of issue
• Delivery must include policy summary
• Receipt must be obtained
• Electronic delivery permitted with consent