2.1 Maine Life Insurance Policy Requirements
Key Takeaways
Maine grants a minimum 10-day free look on life policies, refunding all premiums paid from the date of delivery
Title 24-A §2505 requires a grace period of 30 days, or one month of not less than 30 days, on individual life premiums after the first; group life gets 31 days under §2614
Incontestability (Title 24-A §2507) bars contest after the policy is in force 2 years during the insured's lifetime
Suicide exclusion (Title 24-A §2630) cannot exceed 2 years from the date coverage or an increase commences
The Maine Guaranty Association covers up to $300,000 in death benefits and $100,000 in cash surrender value per insured
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:
| Policy Type | Free Look Period | Begins |
|---|---|---|
| Individual life policy | 10 days | Date of delivery |
| Annuity contract | 10 days | Date of delivery |
| Replacement policy (with required notice) | Often extended to 30 days | Date of delivery |
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 §2505 requires individual life policies to allow a grace period of 30 days, or, at the insurer's option, one month of not less than 30 days for any premium after the first. Group life policies get 31 days under §2614.
| Policy type | Grace period |
|---|---|
| Individual life (§2505) | 30 days, or one month of not less than 30 days |
| Industrial life, premiums payable more often than monthly (§2505) | 4 weeks |
| Group life (§2614) | 31 days |
Key effects of the grace period:
- The policy stays in full force during the grace period 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 "31 days" for an individual policy. That is the group life rule (§2614); the individual-life standard is 30 days or one month per §2505.
Standard Required Provisions
Maine policies must contain a fixed set of provisions; the most-tested are below.
| Provision | Maine Requirement |
|---|---|
| Grace period | 30 days, or one month of not less than 30 days (individual life, §2505); 31 days (group life, §2614) |
| Incontestability | Incontestable after 2 years |
| Suicide | Exclusion ≤ 2 years |
| Entire contract | Policy + attached application = whole contract |
| Misstatement of age/sex | Benefits adjusted to what the premium would have purchased at the true age |
| Reinstatement | Right to reinstate within 3 years of lapse, with evidence of insurability and back premiums plus interest |
| Free look | 10 days minimum |
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:
| Benefit | Maximum Protection per Insured |
|---|---|
| Life death benefit | $300,000 |
| Cash surrender / withdrawal value | $100,000 |
| Aggregate per individual (all lines) | Statutory cap (commonly $300,000) |
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.
An individual life policy is delivered to a Maine consumer on June 1. When does the 10-day free look period begin and what may the owner do during it?
It begins on the application date; the owner may amend the policy
It begins 30 days after delivery; the owner may borrow against cash value
It begins on the issue date; the owner may cancel but forfeits the first premium
It begins on the delivery date; the owner may return the policy for a full refund of premiums paid
What grace period must an individual life policy allow for premiums after the first under Maine Title 24-A §2505?
10 days
20 days
30 days, or one month of not less than 30 days at the insurer's option
31 days for every policy
An insured dies by suicide 18 months after a Maine life policy is issued. What does the insurer owe?
The full face amount, because suicide is always covered
Nothing, because suicide voids the contract permanently
A refund of premiums paid, because death occurred within the 2-year suicide period
Half the face amount as a compromise settlement
Under the Maine Life and Health Insurance Guaranty Association, what is the maximum death benefit protection per insured if the insurer becomes insolvent?
$100,000
$200,000
$300,000
$500,000
Sections you finish are checked off in the contents.