Outline: Missouri Statutes, Rules and Regulations Pertinent to Life Only (printed weight 15 of the 45 Missouri-specific scored items). Headings: I. Policy replacement; II. Policy provisions (A. policy loan rates, B. assignability, C. suicide exclusion, D. war and aviation exclusion); III. Variable products; IV. Group insurance; V. Credit life insurance; VI. Graded death benefits; VII. Universal life.
Life-only questions are fact questions with a rule behind each: how many days, who signs, what the policy must print on its face, which groups may buy group life. Chapter 2 teaches the general clauses; this chapter adds the Missouri text. Several outline citations point at a section that is not the subject of its heading, so Section 13.8 sorts them out. Rules in 20 CSR 400-5 and 600-2 were read from the Cornell Legal Information Institute mirror of the Code of State Regulations; confirm current wording with the Department of Commerce and Insurance.
13.1 Policy Replacement (Outline Life I)
Purpose. 20 CSR 400-5.400 makes sure a buyer replacing life insurance or an annuity gets information to decide in his or her own interest, and reduces misrepresentation. Violations are unfair trade practices under sections 375.930 to 375.948, and failure to follow the duties is treated as false information, false advertising or misrepresentation in an application under 375.936(4), (6) and (7) (20 CSR 400-5.400(1), (8)).
What is a replacement. A new policy or contract is bought and the producer knows or should know an existing one will be lapsed, forfeited, surrendered (fully or partly), assigned to the replacing insurer or otherwise terminated; converted to reduced paid-up or extended term insurance; amended to reduce benefits or the coverage term; reissued with reduced cash value; or used in a financed purchase. A financed purchase pays premiums on the new policy with money from withdrawing, surrendering or borrowing on the old one. Using such money for a new policy owned by the same person and issued by the same company within four months before or thirteen months after its effective date is prima facie evidence of financing (20 CSR 400-5.400(2)(E), (K)).
Not covered: credit life; group life or annuities with no direct solicitation of individuals; group life funding prearranged funerals; changes or conversions with the same insurer; coverage replacing a binding or conditional receipt from the same company; most employer-plan funding; coverage paid wholly by an employer or association; non-convertible term expiring in five years or less; immediate annuities bought with proceeds of an existing annuity (not of a life policy); and structured settlements (400-5.400(1)(B)).
Producer duties (400-5.400(3)):
- Submit with the application a statement signed by applicant and producer on whether the applicant has existing policies or contracts. If no, the replacement duties end.
- If yes, present and read aloud the replacement notice no later than when taking the application. Both sign; an applicant who declines the reading initials that choice.
- List each policy to be replaced (insurer, insured, number) and whether it is replaced or used as financing.
- Leave the applicant all sales material when the application is completed (electronic material in printed form no later than delivery).
- Send the insurer copies of the documents, a list of any preprinted company-approved material used, and any individualized illustrations.
Replacing insurer duties (400-5.400(4), (5)): require the signed statement and notice; supervise producers and detect unreported replacements; notify any affected insurer within five business days of a completed application showing replacement, and mail an available illustration or summary within five business days of its request; keep notices, sales material and signed statements five years (notices until the next domiciliary examination if later); and give notice of the right to return the policy within thirty days of delivery for an unconditional full refund. If the old and new insurers are the same or affiliated, the new policy gets credit for time already run on the incontestability and suicide periods, up to the old face amount.
Existing insurer duties (400-5.400(6)): keep replacement notifications five years; give the owner the right to receive values information (an in-force illustration or summary) within five business days of the request; and when the owner asks to borrow, surrender or withdraw, send a notice that releasing values may affect guarantees, face amount or surrender value.
Direct response (400-5.400(7)): the application must ask whether the applicant intends to replace or change existing coverage. If the answer is no or blank, the insurer sends the Appendix B notice with the policy; if replacement is intended or proposed, it sends the Appendix C notice and follows the notice, record and credit rules above.
Violations (400-5.400(8)): misleading sales material, failing to ask the replacement questions, intentionally recording a wrong answer, telling the applicant to answer no to avoid notice to the old insurer, or advising the owner to write the old company in a way that hides the replacing producer. A pattern of inaccurate "no replacement" answers by one producer is prima facie evidence the producer knew and meant to violate the rule.
13.2 Policy Provisions (Outline Life II)
A. Policy loan rates (II.A)
A life insurer may lend on the cash surrender value a sum not above the legal reserve on the policy (RSMo 376.306, effective 2007-08-28). The interest rate is governed by 20 CSR 400-1.090, which treats a premium loan as a policy loan:
- For policies issued on or after August 13, 1982, the policy must permit either a fixed maximum rate of not more than 8 percent per annum or an adjustable maximum rate set by the insurer.
- An adjustable rate may not exceed the higher of (1) the Moody's Corporate Bond Yield Average, Monthly Average Corporates, for the month ending two months before the determination, or (2) the rate used to compute cash values plus 1 percent.
- The policy states how often the rate is set: at least once every twelve months, not more than once in any three months. At each interval the rate may rise when the cap is one-half percent or more higher and must fall when the cap is one-half percent or more lower.
- The insurer tells the policyholder the initial rate (cash loans at the time; premium loans as soon as practical) and gives reasonable advance notice of an increase.
- No policy may terminate in a policy year solely because the rate changed that year. The permitted rate also applies to reinstatement of loans after a lapse (400-1.090(2)).
B. Assignability (II.B)
The cited statute covers group life only: an insured may assign incidents of ownership, including the right to name a beneficiary, to convert to an individual policy and to pay premiums, subject to the group policy's terms. The assignment vests those rights in the assignee, but the insurer is not prejudiced if it pays or issues an individual policy without notice (RSMo 376.680). Absolute and collateral assignment of individual policies come from the policy and contract law in Chapter 2. An assignment to the replacing insurer is a replacement trigger (13.1).
C. Suicide exclusion (II.C)
Missouri's period is one year. A life policy, rider, endorsement or certificate may exclude suicide, sane or insane, within one year of issue; for added or increased death benefits the exclusion runs one year from the increase, only to the extent of the increase; it must be clearly stated; and the policy must say the insurer will promptly refund all premiums paid for the excluded coverage (RSMo 376.620, effective 2017-08-28). 20 CSR 400-1.050 (suicide no defense) was rescinded in 2008. The national model uses two years; do not carry that over (Chapter 2).
D. War and aviation exclusions (II.D)
The rule regulates notice. A policy with a special war risk or aviation exclusion must have printed or stamped across its face, in type no less prominent than the policy's other emphasis: "READ YOUR POLICY CAREFULLY"; "CERTAIN (WAR, AVIATION) RISKS ARE NOT ASSUMED," naming which or both; and "IN CASE OF ANY DOUBT WRITE YOUR COMPANY FOR FURTHER EXPLANATION." The wording must match the exclusion in the policy (20 CSR 400-1.080). It implements RSMo 376.675, which requires every life policy and annuity form to be filed with and approved by the Director, who must act within 45 days or the form is deemed approved (376.675.1-.2).
13.3 Variable Products (Outline Life III)
A variable contract has dollar benefits or values that vary with a separate account. The state licenses the insurer and producer and regulates the contract; federal securities law adds the prospectus and registration.
Separate accounts (RSMo 376.309):
- Income, gains and losses are credited or charged to the account without regard to the insurer's other results, and, as the contract provides, account assets equal to its reserves are not chargeable with the insurer's other liabilities.
- A domestic life insurer may establish accounts by board resolution, and may invest them without regard to the general investment account limits, except assets equal to the reserve for guaranteed benefits must be invested under general-account rules.
- The Director has sole and exclusive authority to regulate issuance (and authority to regulate sales); the insurers are not subject to registration with the state commissioner of securities. The insurer must satisfy the Director its operations will not be hazardous to the public or policyholders.
- A contract with variable benefits must state that the amount may increase or decrease and say on its first page that benefits are on a variable basis (376.309.9).
Variable annuities (20 CSR 400-1.020):
- Insurer capital and surplus (or surplus, if mutual) of at least $2,500,000, subject to Director exceptions.
- A conspicuous statement that payments and values based on separate account experience are variable and not guaranteed as to fixed dollar amount. Illustrations may not project past experience; hypothetical assumed returns are allowed.
- An individual contract with periodic payments carries a 30-day grace period, reinstatement within five years of default, and a paid-up option; the assumed rate is capped at 5 percent without approval. The insurer reports to the contract holder at least once each contract year after the first.
- Producers must also hold a variable contract insurance producer license before soliciting, obtained by passing a securities and variable contracts examination (Part I securities, Part II variable contracts; Part I is waived for recognized securities registrations). A producer selling only unregistered variable contracts is exempt. The producer must promptly report license discipline, securities sanctions and fraud judgments. Federal registration is separate; confirm current requirements.
Variable life (20 CSR 400-1.030):
- The Director's written approval is required before an insurer issues it.
- The insurer bears mortality and expense risk. A scheduled-premium policy has a minimum death benefit at least equal to the initial face amount while premiums are paid.
- Free look: 10 days from receipt, with a refund of premiums and fees less amounts allocated to separate accounts, plus their value on the return date (until state law allows that, all premiums).
- Grace: scheduled-premium policies 31 days; flexible-premium policies end not less than 61 days after the insurer mails the lapse-warning report.
- Loans: after one full year, at least 75 percent of cash surrender value is borrowable.
- Disclosure and suitability: deliver the prospectus and a plain-language summary at or before application with the applicant's written acknowledgment. No recommendation or issue without reasonable grounds that the policy is not unsuitable. Annual reports go out within 30 days after each anniversary.
- Only a Missouri insurance producer with any license required for variable life may sell it; the licensing exam covers variable life.
13.4 Group Life Insurance (Outline Life IV)
Eligible groups (RSMo 376.691):
| Group | Key requirements |
|---|---|
| Employer | All employees or a class; if employees pay nothing, all eligible employees must be insured except those who reject in writing |
| Creditor | Insures debtors; coverage never above the scheduled debt (special limits for agricultural, educational and residential real estate commitments); benefit may go to the creditor, excess to the second beneficiary or estate |
| Labor union | Members; benefit for persons other than the union |
| Trust of two or more employers or unions | Employees or members, in classes |
| Association | At least 100 persons at the outset; formed for purposes other than obtaining insurance; in existence two years before the policy; regular meetings at least annually |
| Credit union | Members; premium paid from the credit union's funds |
In each case the insurer may exclude or limit anyone whose evidence of insurability is unsatisfactory.
Other groups. A group outside those six needs the Director's finding that the policy is not contrary to the public interest, is actuarially sound, produces economies of acquisition or administration, and has benefits reasonable for the premium (RSMo 376.693). Compensation notice: for direct response or sponsored programs that would not qualify as an employer, creditor, union, trust or credit union group, the insurer must give prospective insureds written notice on or with the application that compensation will or may be paid (376.694). Spouses and children may be covered, except in creditor groups (376.695).
Required provisions. The standard provisions required of individual life policies do not apply to group life (RSMo 376.697). Group life must contain:
| Provision | Rule |
|---|---|
| Grace period | 31 days after the first premium; coverage continues unless the policyholder gave written notice of discontinuance |
| Incontestability | Only nonpayment and fraudulent misstatements after two years from issue; an insured's insurability statement is safe after two years of that person's coverage unless in a signed writing |
| Statements | Application copy attached; statements are representations, not warranties |
| Misstated age | Equitable adjustment of premium or benefit |
| Beneficiary and funeral payments | Paid to the designated beneficiary; insurer may pay up to $2,000 to someone who paid funeral or last-illness expenses |
| Certificate | Issued through the policyholder to each insured |
| Conversion on leaving the group | Individual policy without evidence of insurability if applied for and first premium paid within 31 days; no disability benefits; amount capped at the coverage that ended less other group coverage available within 31 days; premium at the insurer's rate for attained age |
| Conversion when the group policy ends | Available to persons insured at least five years; cap is the ending amount less replacement group coverage or $10,000, whichever is smaller |
| Death during the conversion period | The convertible amount is paid as a group claim whether or not the person applied |
| Total disability | Where active employment is required, coverage may continue during total disability on a premium-paying basis for six months |
A group plan other than term must contain a nonforfeiture provision the Director finds equitable. For debtor groups, the beneficiary, conversion and disability provisions do not apply; the certificate states that the benefit first reduces the debt.
Conversion notice (RSMo 376.699): if an insured is not told of the conversion right at least 15 days before the period ends, the period extends to 15 days after notice, but never more than 60 days after the original period.