Outline: Florida Statutes, Rules, and Regulations Pertinent to Life and Annuity Insurance, Including Variable Products, 10 percent of the exam (shared with Chapter 13). Part C, Individual contracts: standard provisions (protection of beneficiaries from creditors, prohibited provisions, free look, grace period, designation of beneficiary and the effect of divorce, secondary addressee); non-forfeiture options; policy settlement. Part D, Group life: standard and required provisions; conversion rights; types of eligible groups; dependent coverage; employee life; assignment of proceeds. (The printed outline skips number 5 in Part D.)
Chapter 2 taught the general provisions as a national list. The Florida text sits in Part III of Chapter 627 (ss. 627.451 to 627.482) for individual life and annuities, and Part V (ss. 627.551 to 627.575) for group life; the chapter says where Florida differs. Expect numbers: 30 days, 31 days, 2 years, 3 years, 60 days, 8 percent, 21 days, $2,000, $10,000.
14.1 Scope and Standard Provisions (Outline II.C.1)
Scope. Part III applies to life insurance and annuity contracts, not to reinsurance, group life, group annuities or industrial life, except that ss. 627.463, 627.472, 627.476 and 627.479 also reach industrial life. Credit life is outside it, except as Part IX provides (s. 627.451, F.S.).
What a policy must contain. No life policy may be delivered or issued for delivery in Florida unless it contains, in substance, the provisions required by ss. 627.453 to 627.462 and 627.475 and 627.476, or provisions the Office finds more favorable to the policyholder. A provision that does not fit a single-premium or term policy is left out. Annuity contracts, and health or accidental-death supplements, are outside the section (s. 627.452). Print must be plain, lightfaced, at least 10 points with a lowercase alphabet length of at least 120 points, and no part of the text may get undue prominence.
Readable language. A policy form must score at least 45 on the Flesch reading ease test and carry a table of contents or index if it exceeds 3,000 words or three pages; an officer certifies compliance. Group policies covering 1,000 or more lives (other than credit) are exempt (s. 627.4145).
The required provisions, with their numbers:
| Provision | Florida rule |
|---|---|
| Grace period (s. 627.453) | At least 30 days for any premium after the first; interest up to 8 percent a year may be charged; a claim in the grace period is paid less the overdue premium and interest |
| Entire contract (s. 627.454) | Policy, or policy plus a copy of the application attached, is the whole contract; application statements are representations, not warranties, absent fraud |
| Incontestability (s. 627.455) | Incontestable after 2 years in force during the insured's life from the date of issue, except nonpayment of premium and, at the insurer's option, disability and accidental-death provisions |
| Misstatement of age or sex (s. 627.456) | Benefit becomes what the premium would have bought at the correct age or sex, at the insurer's rate at issue |
| Dividends (s. 627.457) | Participating policies: divisible surplus apportioned annually beginning not later than the end of the 3rd policy year; options elected within a period of at least 30 days; payment may be deferred up to 6 years with interest |
| Policy loan (s. 627.458) | Loan available once the policy has cash value and no premium is in default; insurer may defer a loan (except to pay premium) 6 months; policy may end for excess debt only after 30 days' mailed notice to the owner and any assignee of record |
| Reinstatement (s. 627.459) | Within 3 years after default, on written application, evidence of insurability and payment of overdue premiums and debt with interest |
| Authority to alter (s. 627.460) | No agent may waive, change or alter terms; only a signed officer's endorsement or rider |
| Settlement on proof of death (s. 627.461) | Settlement on receipt of due proof of death and surrender of the policy; no day count in this section |
| Table of installments (s. 627.462) | Included if proceeds are payable in installments |
Other Florida provisions worth knowing.
- Excluded coverage. An incontestability clause bars only a challenge to the policy's validity; defenses based on exclusions or restrictions may be asserted at any time (s. 627.463). Reinstated policies can be contested for fraud or material misrepresentation about the reinstatement for the same period and on the same terms as the original policy (s. 627.472).
- Automatic premium loan. If an application offers an automatic premium loan option, the option is deemed elected unless the applicant affirmatively declines it (s. 627.4556).
- Application copy. An application is inadmissible in an action on a life policy unless a true copy was attached when issued; after reinstatement or renewal the insurer sends a copy within 30 days of a request (s. 627.408).
- Total disability. A life policy's waiver of premium may not define total disability more narrowly than inability to do any work for which the person is reasonably qualified (s. 627.4233(2)).
- Policy loan interest. For policies issued on or after October 1, 1981, the maximum is either a fixed 10 percent a year or an adjustable rate no higher than the greater of the published monthly average for the month ending 2 months earlier or the cash-value rate plus 1 percent. It is reset at least every 12 months, not more than every 3, and moves only by 50 basis points or more. The insurer notifies the owner of the rate and changes; no policy ends in a policy year solely from a rate change (s. 627.4585).
- Preneed. A funeral establishment may contract with a life agent for preneed funding; limited final-expense policies are capped at $21,000 plus a consumer-price increase counted from 2016 (s. 626.785). A preneed policy or non-variable annuity pays the seller no more than the retail price of the services; the rest goes to the beneficiary or estate (Rule 69O-148.001, F.A.C.).
14.2 Prohibited Provisions and Prohibited Plans (Outline II.C.1.b)
Florida does not list "prohibited provisions" the way some states do; it prohibits by three methods.
- Less favorable than the statute. A required provision may be replaced only by a more favorable one (s. 627.452); a grace period under 30 days or a loan-default termination without 30 days' notice would fail.
- Side agreements. No insurer or agent may agree to anything other than what the policy plainly expresses (s. 627.474); an inducement not in the contract is an unlawful rebate (s. 626.9541(1)(h)).
- Prohibited plans. No insurer may issue tontine-type contracts that group members by age and pay contingent endowments from special funds to the oldest member, nor annual endowments, coupon-bearing policies or founder's policies; the Office must revoke the certificate of authority of an insurer that does (s. 627.479). Rule 69O-149.024 defines tontine, contingent endowment, coupon and annual endowment, and pure endowment policies, and says it does not ban joint and last survivorship options. A traditional annuity or life policy that pays benefits annually is not a coupon policy.
14.3 Protection of Beneficiaries From Creditors (Outline II.C.1.a)
- Death proceeds. When a Florida resident dies leaving life insurance, the proceeds go exclusively to the person designated in the policy and are exempt from the insured's creditors, unless the policy or a valid assignment provides otherwise. If the proceeds are payable to the insured, the estate, executors, administrators or assigns, they become part of the estate, are administered in probate, and are reachable like other estate assets. The insurer that pays as the statute directs is discharged and need not see to the application of the money (s. 222.13).
- Cash values and annuities. The cash surrender value of a life policy on a Florida citizen or resident, and the proceeds of an annuity issued to one, cannot be attached, garnished or reached by legal process by the insured's or annuitant's creditors, unless the policy or annuity was effected for the benefit of that creditor (s. 222.14).
- Spendthrift protection in settlements. A life insurer may hold policy proceeds under an agreement with the beneficiary, on terms the policyholder sets, including exemption from the claims of the beneficiary's creditors, and need not segregate the funds (s. 627.473).
- Minors. A person 15 or older may contract for insurance on his or her own life and exercise its rights, but is not bound by an unperformed promise to pay premium by note (s. 627.406). A minor domiciled in Florida age 16 or older may give a valid receipt for life insurer payments up to $3,000 a year under maturity, death or settlement provisions (s. 627.424).
14.4 Free Look (Outline II.C.1.c)
The tested numbers for a newly issued contract come from s. 626.99, not from a stand-alone "right to examine" section. Keep them apart:
| Contract | Period | Source |
|---|---|---|
| Individual life | Unconditional refund of at least 14 days lets the insurer deliver the buyer's guide and policy summary with the policy rather than before accepting the premium | s. 626.99(4)(a) |
| Same, as restated by rule | At least 10 days | Rule 69O-151.007(3)(d) |
| Fixed or variable annuity | Unconditional refund of at least 21 days | s. 626.99(4)(b) |
| Variable life | Buyer's guide rules do not apply | s. 626.99(2)(b)5. |
| Sale to a service member, face to face | Explain free look and how to cancel at application | Rule 69O-142.200(5)(t) |
Failure to allow a free-look period is a tracked violation (Rule 69O-142.011). The 10 days many national courses teach is not Florida's annuity number and not what the statute states for life; choose by the contract and source named. Long-term care and Medicare supplement free-look periods are in Chapter 16.
14.5 Grace Period, Reinstatement and Lapse (Outline II.C.1.d)
- Individual life: 30 days minimum, interest up to 8 percent, coverage continues (s. 627.453). National courses often say 31; Florida's floor is 30.
- Annuity: one month but at least 30 days, interest up to 6 percent; reinstatement within 1 year (ss. 627.465, 627.470).
- Group life: 31 days (s. 627.559).
- Reinstatement, individual life: within 3 years of default, unless surrendered for cash or paid-up term has expired (s. 627.459).
14.6 Designation of Beneficiary and Divorce (Outline II.C.1.e)
A beneficiary named by the owner receives proceeds under the policy, subject to the creditor rules above and to the owner's rights (primary, contingent, revocable and irrevocable designations were taught in Chapter 2). Florida adds one rule that is tested.
Divorce voids the designation. A designation made before a marriage was judicially dissolved or declared invalid, naming the former spouse to receive an interest at death, is void as of the time of the dissolution. The interest passes as if the former spouse predeceased the decedent, so it goes to the contingent beneficiary or follows the contract's default order (s. 732.703(2)). The rule covers life insurance policies and annuities (inside or outside employee benefit plans), IRAs, employee benefit plans, payable-on-death and transfer-on-death accounts, for a resident decedent (s. 732.703(3)).
It does not apply when: federal law controls; the owner signs a new instrument after the dissolution expressly naming the former spouse; the divorce order requires the decedent to keep the asset for the former spouse or children; the decedent could not unilaterally change the asset; the designation is irrevocable; another state's law governs; or the owner remarries the same person (s. 732.703(4)). A payor relying on a death certificate or affidavit is protected from liability (s. 732.703(5)-(7)). The rule covers deaths on or after July 1, 2012 (s. 732.703(9)), and a will treats a former spouse the same way (s. 732.507(2)).
National rule: not every state voids by divorce automatically; some require a court order or leave the designation in force. Florida voids it.
14.7 Secondary Addressee (Outline II.C.1.f)
Section 627.4555 protects older owners from unintended lapse:
- Which policies: life contracts issued or delivered in Florida on or after October 1, 1997, covering a natural person 64 or older, in force at least 1 year.
- Duty: before lapse for nonpayment, the insurer mails a notice of the impending lapse to the owner and to a specified secondary addressee, if the owner designated one in writing by name and address. The notice is mailed after the grace period expires and at least 21 days before the lapse takes effect. If the policy's grace period is longer than 51 days, the notice is mailed at least 21 days before the grace period ends.
- Applicant right: the insurer tells the applicant at application of the right to name a secondary addressee; the owner may name or change one any time in writing.
- Agent of record: the insurer also notifies any agent of record at least 21 days before the lapse; receipt does not make the agent responsible. No notice is needed if the agent can check status online or by procedure, there is no agent of record, or the agent is the insurer's or an affiliate's employee.
- Exception: contracts whose premiums are payable monthly or more often and are regularly collected by a licensed agent, or paid by credit card, preauthorized check or automatic bank debit.
Long-term care has its own unintentional-lapse rules (Chapter 16).