State RegulationsMI specificDifficulty 1/5
Which contractual provision is prohibited in an individual Michigan life insurance policy?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
M.C.L. 500.4046 catalogs prohibited provisions in individual life policies, including any provision that forfeits the policy solely for failure to repay a policy loan. Michigan protects policyowners from losing their entire coverage merely because a loan balance is outstanding — the loan is handled through the proceeds at settlement, not through total forfeiture. The practical effect is that an unpaid policy loan can reduce the payout but cannot wipe out the policy on its own.
Why the other options are wrong
- A) A 2-year contestability limit is standard and required — M.C.L. 500.4014 mandates incontestability after 2 years, so this provision is lawful.
- B) The 1-month grace period after the first policy year is required by M.C.L. 500.4012, making it a mandated, not prohibited, provision.
- C) Aviation and military liability limitations are expressly permitted by M.C.L. 500.4042, subject to its limits on supplementary accidental-death benefits.
Memory hook
You can't lose the whole policy just for owing the loan you borrowed from it.