2.1 Maine Life Insurance Policy Requirements

Regulatory Authority and the Insurance Code

Every individual life policy delivered in Maine is governed by Maine Revised Statutes Title 24-A, the Maine Insurance Code, administered by the Maine Bureau of Insurance (a division of the Department of Professional and Financial Regulation). The Bureau licenses producers, approves and disapproves policy forms before sale, investigates complaints, audits market conduct, and enforces continuing-education rules. The Superintendent of Insurance heads the Bureau and may issue cease-and-desist orders, levy fines, and suspend or revoke licenses.

For the exam, anchor every Maine answer to a statute section so you don't confuse Maine rules with generic NAIC model language. The numbers below come straight from the code and are the ones examiners test.

Free Look Period

Maine grants a minimum 10-day free look (also called the right to examine or "right to return") on individual life insurance:

During the free look the owner may return the contract for a full refund of every premium paid — including any policy fees — with no surrender charge and no questions asked. The clock starts on delivery, not the application or issue date. A common trap: candidates pick the application date. Always choose delivery.

Exam Tip: When a replacement is involved, the free look is typically lengthened (commonly to 30 days) so the consumer has time to compare. The base individual life figure remains 10 days.

Incontestability Clause

Under Title 24-A §2507, a life policy must become incontestable after it has been in force during the insured's lifetime for 2 years from the issue date.

• After the 2-year window the insurer cannot void the contract for misstatements or material misrepresentation in the application.
• Carve-outs that survive forever: nonpayment of premium, and (at the insurer's option) total-and-permanent-disability and accidental-death rider provisions.
• Fraud in the application can still be raised in many cases, but routine innocent misstatements are barred after two years.
• The phrase "during the lifetime of the insured" matters: if the insured dies inside the contestable period, the insurer may still contest even after two calendar years pass.

Worked Example

A policy issues March 1, 2024. The insured concealed a heart condition. The insurer discovers it and tries to rescind on April 1, 2026 — just over two years. Because the insured is still alive and the contestable period has expired, the insurer is barred (absent qualifying fraud). Had the insured died February 1, 2026 (inside the two years), the claim could be contested.

Suicide Clause

Title 24-A §2630 caps the suicide exclusion at 2 years from the date coverage — or an increase in coverage — commences.

• Death by suicide "while sane or insane" within 2 years: the insurer refunds premiums paid (or the reserve), not the face amount.
• After 2 years, suicide is paid like any other covered death.
• An increase in coverage starts a fresh 2-year clock on the increased amount only — the original base coverage keeps its earlier date.

This 2-year ceiling parallels incontestability, which is why exam questions pair them. Do not confuse the suicide exclusion period (which can be shorter or zero if the insurer chooses) with the maximum the law allows.

Grace Period Requirements

Title 24-A §2614 requires a 31-day grace period on individual life policies for any premium after the first.

Key effects of the grace period:

• The policy stays in full force during the 31 days even though the premium is overdue.
• If the insured dies during the grace period, the insurer pays the death benefit minus the one premium then due — it does not deny the claim.
• The insurer cannot lapse the policy for late payment until the grace period expires.
• A common distractor is "30 days." Maine's individual-life standard is 31 days per §2614 — pick 31.

Standard Required Provisions

Maine policies must contain a fixed set of provisions; the most-tested are below.

Misstatement of Age — Worked Example

The insured understated her age by 5 years, paying a premium that buys $90,000 at her true age rather than the $100,000 stated. At death the insurer pays $90,000 — the amount the actual premium would have purchased. It does not void the policy; it adjusts the benefit.

Reinstatement Mechanics

Within 3 years of lapse the owner may reinstate by (1) applying, (2) proving insurability, and (3) paying all overdue premiums with interest plus repaying or reinstating any loan. Crucially, reinstatement restarts a new 2-year contestable and suicide window on the reinstated coverage — a frequent exam point.

Beneficiary and Creditor Protections

• Life proceeds payable to a named beneficiary are generally exempt from the insured's creditors.
• Designations must be honored exactly as written; insurers must make good-faith efforts to locate beneficiaries.
• Spendthrift settlement options can shield proceeds from a beneficiary's creditors.

Maine Life and Health Insurance Guaranty Association

If a member insurer becomes insolvent, the Guaranty Association steps in up to statutory caps:

Exam Tip: Producers and insurers may not advertise or use the Guaranty Association as a sales inducement. Mentioning it to close a sale is a prohibited practice.