Arizona Life Insurance Policy Requirements

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

Free Look Period

Arizona provides free look periods for life insurance:

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: Arizona's standard 10-day free look extends to 20 days for persons age 65 and older. This senior protection is important for the exam.

Incontestability Clause

Arizona 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
• The clause protects beneficiaries from having claims denied due to application errors

Arizona Specific Rules

• Incontestability period begins from the issue date
• If policy lapses and is reinstated, a new 2-year period begins for statements in reinstatement application
• Does not protect against intentional fraud

Suicide Clause

Arizona limits the suicide exclusion:

• Suicide exclusion cannot exceed 2 years from policy issue
• After 2 years, death by suicide is covered as any other death
• If policy is reinstated, new 2-year period may apply
• Benefit is typically limited to premiums paid if suicide within 2 years

Required Policy Provisions

Arizona requires specific provisions in life insurance policies:

Mandatory Provisions

Misstatement of Age or Sex

If the insured's age or sex was misstated:

• Policy is NOT voided
• Benefits adjusted to what premiums would have purchased at correct age/sex
• Premium refund if overpaid based on misstatement
• Additional premium due if underpaid

Unfair Discrimination Prohibitions

Arizona prohibits unfair discrimination in life insurance:

What IS Prohibited

• Discrimination based on race
• Discrimination based on religion
• Discrimination based on national origin
• Discrimination not based on actuarial data

What IS Permitted

Insurers can consider factors with actuarial justification:

• Age
• Sex (with actuarial basis)
• Health conditions
• Smoking status
• Occupation
• Hazardous activities

Arizona Specific: Arizona allows sex-based rates in life insurance if actuarially justified, unlike some states that prohibit this entirely.

Beneficiary Provisions

Arizona has specific beneficiary rules:

Change of Beneficiary

• Policyholder retains right to change beneficiary unless irrevocable
• Change effective when written request received by insurer
• Insurer not liable for payment before notice received

Facility of Payment

• If no beneficiary survives, benefit paid to estate
• Small amounts may be paid to persons who paid final expenses