2.1 Florida Life Insurance Policy Requirements

Required Policy Provisions in Florida

Florida law (Chapter 627, Florida Statutes — the Florida Insurance Code) sets out mandatory provisions that every individual life policy delivered in the state must contain. The Florida 2-15 Life, Health & Variable Annuity exam (delivered by Pearson VUE, 165 questions with 150 scored, 70% passing score) tests these numbers literally, so memorize the exact thresholds rather than the general concept.

Free Look Period

The free look (also called the right to examine) lets the owner return a policy for a full premium refund. Under Section 626.99, F.S., the minimum is 14 days from delivery for life policies, while all annuities get a longer 21-day window:

Exam trap: the 21-day figure belongs to every annuity (fixed, indexed, variable, or market-value), NOT to replacement policies. Many students wrongly memorize "21 days for replacements" or apply the 14-day life number to annuities. Florida does not lengthen the life free look merely because the sale is a replacement. The clock starts when the policy is delivered, not when it is signed, approved, or issued.

During the free look the owner returns the contract and receives all premiums paid back with no surrender charge, fee, or interrogation.

Incontestability Clause

Florida requires a 2-year incontestability clause running from the date of issue. After two years the insurer cannot void the policy or deny a death claim based on a material misstatement in the application — even a misrepresentation about health.

• Exceptions that survive forever: non-payment of premium, and (in most states including Florida) the policy never having been in force.
• Fraud: Florida courts generally hold that fraudulent statements can still be contested during the two years; once the period runs, even fraud is barred for the death benefit.
• A reinstated policy starts a new contestable period (typically 2 years) covering only statements made in the reinstatement application.
• The clause protects the death benefit only; it does not bar contest of riders such as accidental death or waiver of premium.

Suicide Clause

The suicide exclusion may not exceed 2 years from issue. If the insured dies by suicide within that window, the insurer refunds premiums paid (it does not pay the face amount). After two years, suicide is paid exactly like any other death. Reinstatement may restart the suicide period.

Misstatement of Age or Sex

If the insured's age (or sex) was misstated, Florida does not let the insurer void the contract. Instead the death benefit is adjusted to the amount the premium actually paid would have purchased at the correct age.

Worked example: A 45-year-old is mistakenly issued at age 40. The annual premium of $620 buys $100,000 at the stated age 40, but at the true age 45 that same $620 buys only $86,500. The beneficiary receives $86,500, not $100,000 — the contract stays in force, just reduced.

Grace Period, Reinstatement, and Entire Contract

Grace Period

Florida sets the grace period by premium mode — a frequent multiple-choice distractor:

During grace the policy stays in force. If the insured dies in grace, the death benefit is paid minus the unpaid premium. Do not confuse the 31-day grace with the 14-day free look — the exam pairs them deliberately.

Reinstatement

After a lapse, Florida requires the policy allow reinstatement for up to 3 years (some contracts allow longer). To reinstate, the owner must:

1. Provide evidence of insurability acceptable to the insurer,
2. Pay all back premiums with interest, and
3. Repay or reinstate any outstanding policy loan with interest.

Reinstatement is cheaper than a new policy because the premium is based on the original issue age, but it restarts the contestable and suicide periods.

Entire Contract

The entire contract provision states the policy, any attached riders, and the copy of the application together form the whole agreement. The insurer cannot point to outside documents (bylaws, underwriting manuals) to deny a claim. Any statement in the application is treated as a representation, not a warranty, so only a material misstatement can affect coverage.

Beneficiary and Unclaimed-Benefit Rules

Florida adopted the Unclaimed Life Insurance Benefits Act, requiring insurers to periodically compare in-force policies against the Social Security Death Master File, attempt to locate beneficiaries, and — if none is found — report the proceeds as unclaimed property to the Florida Department of Financial Services. Benefits are not forfeited; beneficiaries may claim from the state at any time. The standard spendthrift clause also shields proceeds from a beneficiary's creditors until paid.

Other Mandatory Provisions Tested

• Loan provision: whole life must allow a policy loan against cash value once the policy has value (usually after the third year); Florida caps the loan interest rate disclosure and allows automatic premium loans if elected.
• Nonforfeiture options: on lapse the owner may take cash surrender value, reduced paid-up insurance, or extended term insurance — the insurer cannot simply keep the accumulated value.
• Dividend options (participating policies): cash, premium reduction, accumulate at interest, paid-up additions, or one-year term — dividends are a return of overcharged premium and are not taxable.
• Assignment: the owner may assign the policy; the insurer is not bound until written notice is received.

Exam tip: The Florida exam frequently pairs the 14-day free look against the 31-day grace period and the 2-year incontestability against the 2-year suicide clause. Two pairs of numbers, four provisions — lock them in. When a question gives a monthly debit mode, the grace period is 30 days, not 31.