Key Takeaways
- Alabama requires a 10-day free look period for standard life insurance policies
- Life insurance policies must include a 2-year incontestability clause under Alabama law
- Suicide exclusion in Alabama is limited to 2 years from policy issue date
- Alabama requires a 31-day grace period for premium payments
- The Alabama Department of Insurance (ALDOI) regulates all life insurance under Title 27
Alabama Life Insurance Policy Requirements
Alabama law imposes specific requirements on life insurance policies sold in the state under Title 27 of the Code of Alabama. These requirements protect consumers and ensure policy standardization.
Free Look Period
Alabama provides a standard free look period for life insurance:
| Policy Type | Free Look Period |
|---|---|
| Standard Life Policy | 10 days |
| Replacement Policy | 10 days |
| Long-Term Care | 30 days |
| Annuities | 10 days |
During the free look period, the policyholder can:
- Review the policy thoroughly
- Return it for a full refund of premiums paid
- No questions asked, no penalty charged
- No fees for exercising the free look right
Exam Tip: Alabama's 10-day free look is the standard period found in most states. Long-term care insurance has an extended 30-day free look period.
Incontestability Clause
Alabama 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
Alabama Specific Rules
- Incontestability period begins from the issue date
- If policy lapses and is reinstated, a new 2-year period begins
- Applies to both individual and group life insurance policies
Suicide Clause
Alabama limits the suicide exclusion:
- Suicide exclusion cannot exceed 2 years from policy issue
- After 2 years, death by suicide is covered at full face value
- If policy is reinstated, a new 2-year period may apply
- Return of premiums is required if suicide occurs within exclusion period
Standard Policy Provisions
Alabama requires life insurance policies to include specific provisions:
Required Provisions
| Provision | Requirement |
|---|---|
| Grace Period | Minimum 31 days for premium payment |
| Entire Contract | Policy and attached application constitute entire contract |
| Misstatement of Age | Adjustment of benefits rather than voidance |
| Reinstatement | Right to reinstate within 3 years if lapsed |
| Policy Loan | Available for cash value policies |
| Assignment | Right to assign policy ownership |
| Nonforfeiture Options | Required for cash value policies |
Grace Period Details
- 31 days minimum grace period for premium payments
- Coverage continues during grace period
- Policy cannot be canceled for non-payment until grace period expires
- Death benefits are paid minus any overdue premium if insured dies during grace period
Nonforfeiture Options
Alabama follows the NAIC Standard Nonforfeiture Law for cash value policies:
| Option | Description |
|---|---|
| Cash Surrender | Receive cash value minus any loans |
| Reduced Paid-Up | Continue coverage at reduced amount, no more premiums |
| Extended Term | Continue full coverage for limited period |
Automatic Option
If policyholder doesn't elect an option:
- Extended Term Insurance is typically the automatic default
- Company must notify policyholder of lapse
- Minimum 31-day grace period applies
Beneficiary Protections
Alabama has specific beneficiary protection laws:
Payment of Death Benefits
- Death benefits must be paid promptly upon valid claim
- Insurers must act in good faith to locate beneficiaries
- Interest accrues if payment is delayed
Life Policy Search Service
Alabama offers a Life Policy Search Service through ALDOI to help beneficiaries locate lost or forgotten life insurance policies.
Insurable Interest Requirements
Alabama requires insurable interest at policy inception:
- Self, spouse, children/dependents
- Business partners for key person coverage
- Creditors to extent of debt
How long is the free look period for a standard life insurance policy in Alabama?
What is the minimum grace period required for life insurance premium payments in Alabama?
After what period can an insurer not contest a life insurance policy for misrepresentation in Alabama?