CE review of life insurance types, provisions, riders, and Louisiana-specific regulations including LLHIGA protections and replacement regulations.
Upon completion of this course, you will be able to:
Purchase this course to save your certificate
Enroll — $19 →Life insurance is the foundation of financial planning for most families. Understanding the spectrum of available products allows producers to match client needs with appropriate coverage.
Term insurance provides a pure death benefit for a specified period with no cash value accumulation. It is the simplest and most affordable form of life insurance.
Whole life provides lifetime coverage with level premiums and guaranteed cash value accumulation. The policy endows (cash value equals face amount) at age 100 under traditional designs, or age 121 under newer actuarial standards. Types include:
Universal life provides flexible premiums and adjustable death benefits with a separate interest-crediting account. The policy has a current interest rate (which may change) and a guaranteed minimum rate. Monthly mortality charges and expense charges are deducted from the cash value. The policy lapses if the cash value falls to zero.
Variable life insurance places the policy's cash value in separate sub-accounts that function like mutual funds. The death benefit and cash value fluctuate based on sub-account performance. Because variable products involve investment risk and are securities products, producers must hold both a state insurance license and a securities license (Series 6 or 7) to sell them.
A policy that fails the 7-pay test (is overfunded relative to IRS standards) becomes a Modified Endowment Contract. MECs lose the favorable tax treatment on loans and withdrawals that other life insurance policies enjoy. Distributions from MECs are taxed on a gains-first basis (LIFO) and subject to a 10% penalty if taken before age 59½.
Every life insurance policy contains standard provisions required by Louisiana law that protect policyholders' rights. Understanding these provisions helps producers explain coverage accurately and avoid misrepresentation.
Louisiana requires a minimum 20-day free look period for life insurance policies. During this period, the policyholder may review the policy and return it for a full refund of all premiums paid, for any reason, without penalty.
Louisiana requires a minimum 31-day grace period for life insurance policies. If a premium is not paid by its due date, coverage continues in full for 31 days. If death occurs during the grace period, the death benefit is paid (minus any outstanding premium).
After a policy has been in force for 2 years, the insurer cannot contest the validity of the policy based on material misrepresentation on the application, except in cases of fraud. This provision gives policyholders confidence that claims will be paid after the contestability period expires.
A lapsed policy may be reinstated within a specified period (typically 3-5 years) by paying all overdue premiums with interest, demonstrating that the insured is still insurable, and repaying any outstanding policy loans. Reinstatement restores the original contestability period for the reinstated policy.
Most life insurance policies exclude coverage for suicide occurring within the first 2 years of the policy. If the insured dies by suicide during this period, premiums paid are typically returned but the death benefit is not paid. After 2 years, the suicide exclusion generally expires and the full death benefit is payable.
An absolute assignment transfers all ownership rights in the policy to another party permanently. A collateral assignment pledges the policy as collateral for a loan; the lender's rights are limited to the outstanding loan balance. Producers should understand assignment provisions when clients use life insurance for business planning or estate purposes.
Riders are optional provisions that can be added to a life insurance policy to customize coverage for individual client needs. Understanding available riders allows producers to build comprehensive coverage packages.
| Rider | What It Does | Key Consideration |
|---|---|---|
| Waiver of Premium | Waives premium payments if insured becomes totally disabled | Must be totally disabled for 6 months; premiums are waived retroactively |
| Accidental Death Benefit (ADB) | Pays additional death benefit (often 2x face amount) if death results from accident | Definition of "accident" varies by policy; many exclusions apply |
| Guaranteed Insurability Option (GIO) | Allows purchase of additional coverage at specified future dates without medical underwriting | Valuable for young, healthy clients anticipating growing insurance needs |
| Accelerated Death Benefit (ADB) | Allows access to a portion of the death benefit while living if terminally ill | Reduces the death benefit; may affect Medicaid eligibility |
| Child Term Rider | Provides term coverage for all children in the family under one rider | Typically convertible to permanent insurance when child reaches adulthood |
| LTC Rider | Provides LTC benefits by accelerating the death benefit | Hybrid product; benefits reduce the death benefit dollar for dollar |
| Return of Premium | Returns all premiums paid if insured outlives a term period | Significantly higher premium for the return of premium feature |
LLHIGA protects Louisiana policyholders when a licensed life or health insurer becomes insolvent. Coverage limits for life insurance:
Prohibited Sales Practice: Producers may not use LLHIGA coverage as a sales tool or imply that LLHIGA protection makes one carrier's policy safer than another's. Mentioning LLHIGA in a sales context is a prohibited practice under Louisiana law.
When a new life insurance policy replaces existing coverage, Louisiana requires specific disclosures and documentation to ensure the replacement is in the client's best interest:
Your exam score was
You need 70% (18 of 25 correct) to pass. Review the modules and retake when ready. There is no limit on retake attempts.