Arizona laws provide certain protections to you when you purchase life insurance. These protections range from how life insurance companies do business with you to what happens if the insurer fails and cannot pay claims. These laws are found under Title 20 of the Arizona Revised Statutes. You should understand these laws before you buy a policy in the state.
Grace Period
Insurance companies must give you a 30-day grace period when you miss a premium payment. This grace period allows you to catch up on your premium payment. During this time, the insurer cannot cancel your policy. You must make your next regularly scheduled premium payment on time.
Death Benefit Settlement
When you receive money from an insurance policy as a beneficiary, you must file a death benefit claim. You must also provide the insurance company with a copy of the death certificate. However, once you've done that, the insurance company has two full months to pay the death benefit. They must pay the death benefit within this time frame. If they do not, interest will accumulate on the death benefit amount until the benefit is paid.
Guaranty Association
Arizona has a state guaranty association called the Arizona Life and Disability Insurance Guaranty Fund. All insurance companies licensed to do business in the state must contribute to the fund. If an insurer fails, then the state pays out money to policyholders to compensate them for their loss. The compensation for the loss is limited, however. Maximum benefits are $300,000 for death benefits and $100,000 for those who have not died and are expecting cash value from their policies.
Creditors
You are protected from creditors in Arizona. Your beneficiaries will receive 100 percent of the death benefit because the death benefit is wholly protected from creditors. Your interest in the policy (cash value) is limited to a $25,000 exemption provided that you've owned the policy for at least two years and a child, spouse or family member is named the beneficiary. These protections are found under sections 20-1131 and 33-1126(A)(1) and (6), and (C) of the Arizona Revised Statues.
Tags: death benefit, premium payment, Arizona Life, Arizona Revised, cash value