Key Takeaways
- Illinois requires a 10-day free look period for life insurance policies (20 days for senior citizens age 65+)
- Life insurance policies must include a 2-year incontestability clause under Illinois law
- Illinois has a 2-year suicide exclusion period from policy issue date
- Illinois prohibits unfair discrimination based on race, sex, or marital status in life insurance
- Grace period for premium payment must be at least 30 days for annual premium policies
Illinois Life Insurance Policy Requirements
Illinois law imposes specific requirements on life insurance policies sold in the state. These requirements protect consumers and ensure policy standardization.
Free Look Period
Illinois provides a free look period for life insurance policies:
| Policy Type | Free Look Period |
|---|---|
| Standard Life Policy | 10 days |
| Senior Citizens (65+) | 20 days |
| Medicare Supplement | 30 days |
| Annuities | 10 days (20 days for seniors) |
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: Illinois provides a 10-day free look for standard life insurance, but 20 days for senior citizens age 65 and older. This enhanced protection for seniors is frequently tested.
Incontestability Clause
Illinois 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
Illinois Specific Rules
- Incontestability period begins from the issue date
- If policy lapses and is reinstated, a new 2-year period begins
- Does not protect against material fraud
Suicide Clause
Illinois limits the suicide exclusion:
- Suicide exclusion cannot exceed 2 years from policy issue
- After 2 years, death by suicide is covered
- If policy is reinstated, new 2-year period may apply
- Accidental death benefits may have different rules
Unfair Discrimination Prohibitions
Illinois prohibits unfair discrimination in life insurance:
Protected Classes in Illinois Insurance
| Protected Class | Prohibition |
|---|---|
| Race | Cannot use race in underwriting or rating |
| Color | Cannot discriminate based on color |
| Sex | Limited use in underwriting (actuarially justified) |
| Marital Status | Cannot discriminate based on marital status |
| National Origin | Cannot discriminate based on origin |
| Religion | Cannot discriminate based on religion |
What IS Permitted
Insurers can consider:
- Age
- Health conditions
- Smoking status
- Occupation (with limitations)
- Lifestyle factors related to risk
Note: Illinois allows actuarially justified distinctions based on sex for life insurance, unlike some states that prohibit sex-based rating entirely.
Grace Period Requirements
Illinois requires minimum grace periods for premium payment:
| Premium Mode | Minimum Grace Period |
|---|---|
| Annual | 30 days |
| Semi-Annual | 30 days |
| Quarterly | 30 days |
| Monthly | 30 days |
During the grace period:
- Policy remains in force
- Coverage continues
- Premium can be paid without penalty
Policy Delivery Requirements
Illinois requires:
- Policy delivered within 30 days of issue
- Delivery must include policy summary
- Receipt should be obtained
- Electronic delivery permitted with consent
How long is the free look period for a life insurance policy sold to a 70-year-old in Illinois?
After what period does the incontestability clause take effect in Illinois?