2006 New York Code - Individual Life Insurance Policies; Standard Provisions As To Contractual Rights And Responsibilities Of Policyholders And Insurers.

 
    §  3203. Individual life insurance policies; standard provisions as to
  contractual rights and responsibilities of policyholders  and  insurers.
  (a)  All  life  insurance  policies,  except as otherwise stated herein,
  delivered or issued  for  delivery  in  this  state,  shall  contain  in
  substance   the   following   provisions,   or   provisions   which  the
  superintendent deems to be more favorable to policyholders:
    (1) that, after payment of the  first  premium,  the  policyholder  is
  entitled  to a thirty-one day grace period or of one month following any
  subsequent premium due date within which to make payment of the  premium
  then  due.  During  such grace period, the policy shall continue in full
  force;
    (2) that if the death of the insured occurs within  the  grace  period
  provided  in the policy, the insurer may deduct from the policy proceeds
  the portion of any unpaid premium applicable to the period  ending  with
  the  last  day  of the policy month in which such death occurred, and if
  the death of the insured occurs during a period for  which  the  premium
  has  been paid, the insurer shall add to the policy proceeds a refund of
  any premium actually paid for any period beyond the end  of  the  policy
  month in which such death occurred, provided such premium was not waived
  under  any  policy  provision  for  waiver  of  premiums  benefit.  This
  paragraph shall not apply to single premium or paid-up policies;
    (3) that the policy shall be incontestable after being in force during
  the life of the insured for a period of  two  years  from  its  date  of
  issue, and that, if a policy provides that the death benefit provided by
  the  policy  may  be increased, or other policy provisions changed, upon
  the application of the policyholder and the production  of  evidence  of
  insurability,  the  policy  with respect to each such increase or change
  shall be incontestable after two years from the effective date  of  such
  increase  or  change,  except in each case for nonpayment of premiums or
  violation of policy conditions relating to service in the armed  forces.
  At  the option of the insurer, provisions relating to benefits for total
  and permanent disability and additional benefits  for  accidental  death
  may also be excepted;
    (4)  that the policy, together with the application therefor if a copy
  of such application  is  attached  to  the  policy  when  issued,  shall
  constitute  the  entire contract between the parties; but in the case of
  policies that provide that the death benefit or other policy  provisions
  may  be  changed  by  written  application  or  by the written notice of
  exercise of one or more options provided in the policy, or automatically
  by the terms of the policy, the policy may also contain a provision that
  when such written application or notice of  exercise  of  an  option  is
  accepted  by  the  insurer  or  a  notice of any change is issued by the
  insurer and, in each case, a copy  of  such  application  or  notice  is
  returned  by mail or delivered to the policyholder at the policyholder's
  last post office address known  to  the  insurer,  such  application  or
  notice shall become part of the entire contract between the parties;
    (5)  that  if  the  age  of the insured has been misstated, any amount
  payable or benefit accruing under  the  policy  shall  be  such  as  the
  premium would have purchased at the correct age;
    (6)  that  the  insurer  shall  annually  ascertain  and apportion any
  divisible surplus accruing on the policy;
    (7) (A) that, in the case of policies which provide for the  crediting
  of  additional  amounts  pursuant  to  subsection  (b)  of  section four
  thousand two hundred thirty-two of this  chapter  or  under  which  cash
  surrender   values  are  adjusted  in  accordance  with  a  market-value
  adjustment formula or which cause on a basis guaranteed  in  the  policy
  unscheduled  changes  in benefits or premiums or which provide an option
  for changes in benefits or premiums other than a change to a new policy,
  specifies  the  mortality  table,  interest  rate  and  method  used  in
  calculating cash surrender values and any paid-up nonforfeiture benefits
  available under the policy;
    (B)  that,  in  the  case  of  all  other policies, specifies the cash
  surrender values and other options available in the event of default  in
  a  premium payment after premiums have been paid for a specified period,
  together with a table showing, in figures, all options available  during
  each  of the policy's first twenty years. Such options shall comply with
  the requirements of subsection (a) of section four thousand two  hundred
  twenty or section four thousand two hundred twenty-one of this chapter;
    (8)  (A) that the policyholder shall be entitled to a loan at any time
  the policy is in force in an amount not exceeding the  loan  value,  and
  under  the  conditions,  specified  in section four thousand two hundred
  twenty-two of this chapter, provided three  full  years'  premiums  have
  been paid or, in the case of policies that provide that the policyholder
  may vary the amount and frequency of premiums to be paid to the insurer,
  after  three years from the issue of the policy, if the policy is not in
  default;
    (B) that the sole security for the loan shall be assignment or  pledge
  of the policy;
    (C)  that,  unless the policy provides for the crediting of additional
  amounts pursuant to subsection (b) of section four thousand two  hundred
  thirty-two  of this chapter or provides for the adjustment of the policy
  loan value in accordance  with  a  market-value  adjustment  formula  or
  causes  on  a  basis  guaranteed  in  the  policy unscheduled changes in
  benefits or premiums or provides an option for changes  in  benefits  or
  premiums other than a change to a new policy, the policy shall contain a
  table  showing  the  loan  values,  if any, available during each of the
  policy's first twenty years;
    (D) that, in making a loan, the insurer may reduce the loan value  (in
  addition  to the indebtedness deducted in determining such value) by any
  unpaid premium balance for the current policy year;
    (E) that, if the loan is made or repaid  on  a  date  other  than  the
  anniversary  of  the  policy,  the  insurer may collect interest for the
  portion of the current policy year on a pro rata basis;
    (F) that, at the option of the insurer, the loan shall  bear  interest
  (i)  at a maximum rate of not more than seven and four-tenths per centum
  per annum if payable in advance or  the  equivalent  effective  rate  of
  interest  if  otherwise  payable,  or (ii) at a rate not in excess of an
  adjustable maximum rate established from time to time by the insurer  as
  permitted  by  law.  If  the policy provides for an adjustable rate, the
  policy shall specify the regular intervals at which the interest rate is
  to be determined which shall be at least once every  twelve  months  but
  not more frequently than once in any three month period;
    (G)  the  policy  may further provide: (i) that if the interest on the
  loan is not paid when due, it shall be added to the existing  loan,  and
  shall  bear interest at the applicable rate or rates payable on the loan
  determined in accordance with the provisions of  the  policy,  and  (ii)
  subject  to  subsection (e) of section three thousand two hundred six of
  this article that when the total indebtedness on the  policy,  including
  interest  due  or  accrued, equals or exceeds the amount of the policy's
  loan value and if at least thirty days' prior  notice  shall  have  been
  given  in  the  manner  provided  in  section three thousand two hundred
  eleven of this article, then the policy shall terminate and become void;
    (H) any policy which provides for the crediting of additional  amounts
  pursuant  to  subsection  (b)  of  section  four  thousand  two  hundred
  thirty-two of this chapter may also provide that if any indebtedness  is
  owed  to the insurer on any part of the loan value which would otherwise
  be credited with additional amounts,  such  additional  amounts  may  be
  reduced  so that the total amounts credited on such part are so credited
  at a rate that is up to two percent per annum less than  the  applicable
  loan  interest rate charged or at such other rate as the superintendent,
  upon the insurer's demonstrating justification therefor, may allow;
    (I) this paragraph eight shall not apply to term insurance;
    (J) this paragraph eight shall not apply to any policy  qualified  for
  special tax treatment under subsection (b) of section four hundred three
  of  the  Internal  Revenue  Code of 1986, as amended, to the extent such
  application would prevent such qualification;
    (9) a table showing the  amounts  of  the  applicable  installment  or
  annuity  payments, if the policy proceeds are payable in installments or
  as an annuity;
    (10) that the policy shall be reinstated  at  any  time  within  three
  years from the date of default, unless the cash surrender value has been
  exhausted  or  the  period  of  extended  insurance  has expired, if the
  policyholder  makes  application,  provides  evidence  of  insurability,
  including  good  health,  satisfactory  to the insurer, pays all overdue
  premiums with interest at a rate not exceeding six per centum per  annum
  compounded   annually,   and   pays   or  reinstates  any  other  policy
  indebtedness with interest at a rate not exceeding the applicable policy
  loan  rate  or  rates  determined  in  accordance  with   the   policy's
  provisions.    This  provision  shall  be  required  only  if the policy
  provides for termination or lapse in the event of a default in making  a
  regularly scheduled premium payment;
    (11)  that  upon  surrender  of  the  policy,  together with a written
  request for cancellation, to the insurer during a  period  of  not  less
  than  ten  days  nor  more than thirty days from the date the policy was
  delivered to the policy owner, the insurer shall refund either  (i)  any
  premium  paid for the policy, including any policy fees or other charges
  or (ii) if the policy provides for the adjustment of the cash  surrender
  benefit  in accordance with a market-value adjustment formula and if the
  policy or a notice attached to it so provides, the amount  of  the  cash
  surrender  benefit  provided under the policy as so adjusted assuming no
  surrender charge plus the amount of all fees and other charges  deducted
  from  any premium paid or from the policy value; provided, however, that
  a policy sold by mail order must  contain  a  provision  permitting  the
  policy owner a thirty day period for such surrender. A provision to this
  effect shall appear in the policy or in a notice attached to it;
    (12)  in  any  policy  under  which additional amounts may be credited
  pursuant  to  subsection  (b)  of  section  four  thousand  two  hundred
  thirty-two  of  this  chapter,  that  states  the  guaranteed factors of
  mortality, expense and interest, and a statement of the method  used  by
  the insurer in calculating actual policy values;
    (13)  in  any  policy  under  which additional amounts may be credited
  pursuant  to  subsection  (b)  of  section  four  thousand  two  hundred
  thirty-two  of  this  chapter,  that  such  additional  amounts shall be
  nonforfeitable after the effective date of their  crediting  except  for
  any  charges  imposed  under the policy which are not greater than those
  allowed under subsection (n-1)  or  any  market  value  adjustment  made
  pursuant  to  subsection  (n-2)  of  section  four  thousand two hundred
  twenty-one of this chapter; and
    (14) in any policy under which additional amounts may be credited  for
  any  period  pursuant  to  subsection  (b)  of section four thousand two
  hundred thirty-two of this chapter, that states that the  insurer  shall
  credit  any  such  amount  no  less frequently than annually during such
  period.
    (15) that states on the policy data or policy specifications page of a
  participating cash value policy that dividends are  not  guaranteed  and
  the  insurer  has  the  right  to  change  the  amount of dividend to be
  credited to the policy which may result in lower  dividend  cash  values
  than  were  illustrated,  or, if applicable, require more premiums to be
  paid than were illustrated.
    (16) that states on the policy data or policy specifications page of a
  life insurance policy subject to subsection (b) of section four thousand
  two hundred thirty-two of this chapter, to the extent  applicable,  that
  additional  amounts  are not guaranteed and the insurer has the right to
  change the amount of interest credited to the policy and the  amount  of
  cost  of  insurance  or  other expense charges deducted under the policy
  which may require more premium to be paid than was  illustrated  or  the
  cash values may be less than those illustrated.
    (17)  that  states on the policy data or policy specification page the
  minimum guarantee interest rate used to determine the guaranteed  policy
  values.
    (b)  (1)  A  life insurance policy delivered or issued for delivery in
  this state may exclude or restrict  liability  in  the  event  of  death
  occurring  while  the insured is resident in a specified foreign country
  or  countries,  but  shall  not  contain  any  provision  excluding   or
  restricting  liability  in  the  event  of  death  caused  in  a certain
  specified manner, except as a result of:
    (A) conditions specified in subsection  (c)  hereof,  subject  to  the
  terms of such subsection;
    (B) suicide within two years from the date of issue of the policy;
    (C) aviation under conditions specified in the policy;
    (D)  hazardous  occupations  specified  in  the policy, provided death
  occurs within two years from the date of issue of the policy.
    (2)  The  superintendent  may  approve  provisions  that   vary   from
  subparagraphs (A) through (D) of paragraph one hereof and subsection (c)
  hereof, whenever he deems such substitute provisions to be substantially
  the same or more favorable to policyholders.
    (3)  If  a death occurs that is subject to an exclusion or restriction
  pursuant to this subsection or subsection (c) hereof, the insurer  shall
  pay  the reserve on the face amount of the policy, computed according to
  the mortality table and interest rate specified in the policy,  together
  with  the  reserve  for any paid-up additions thereto, and any dividends
  standing to the credit of the  policy,  less  any  indebtedness  to  the
  insurer  on the policy, including interest due or accrued; provided that
  if the policy shall have been in force for not more than two years,  the
  insurer shall pay the amount of the gross premiums charged on the policy
  less  dividends  paid in cash or used in the payment of premiums thereon
  and less any indebtedness  to  the  insurer  on  the  policy,  including
  interest due or accrued.
    (c)  (1)  A  life insurance policy delivered or issued for delivery in
  this state may contain provisions excluding or restricting liability  in
  the event of death as a result of:
    (A)  war  or  an  act  of  war, if the cause of death occurs while the
  insured is serving in any armed forces or  attached  civilian  unit  and
  death  occurs  no  later  than  six months after the termination of such
  service;
    (B) the special hazards incident to service in  any  armed  forces  or
  attached  civilian  unit, if the cause of death occurs during the period
  of such service while the insured is outside the home area, and if death
  occurs outside the home area or within six months  after  the  insured's
  return to the home area while in such service or within six months after
  the termination of such service, whichever is earlier;
    (C)  war  or an act of war, within two years from the date of issue of
  the policy, if the cause of death occurs while the  insured  is  outside
  the  home  area  but  is  not  serving  in  any armed forces or attached
  civilian unit, and death occurs outside the  home  area  or  within  six
  months after the insured's return to the home area.
    (2)  The  superintendent  may,  by  regulation,  prescribe  reasonable
  conditions relating to the use of provisions permitted by paragraph  one
  hereof.  The  provisions  of  subsection  (b)  hereof shall apply to any
  policy containing any provision permitted by this subsection.
    (3) As used in this subsection, the term:
    (A) "armed forces" means the military, naval, or  air  forces  of  any
  country, international organization, or combination of countries;
    (B) "attached  civilian  unit"  means  a  civilian  non-combatant unit
  serving with any armed forces;
    (C) "home area" means the fifty  states  of  the  United  States,  the
  District of Columbia, and Canada;
    (D) "war"   includes   any  war  declared  or  undeclared,  and  armed
  aggression resisted by any armed forces;
    (E) "act of war" means any act peculiar to  military,  naval,  or  air
  operations in time of war; and
    (F) "special  hazards  incident  to  service",  includes those hazards
  resulting in the insured's death  being  presumed  by  reason  of  being
  missing, in action, or otherwise, or the insured's death from disease or
  injury,  accidental or otherwise, to which a person serving in, or with,
  any armed forces or attached civilian units is exposed in  the  line  of
  duty.
    (4)  In  permitting  war exclusions, it is the legislative intent that
  such exclusions are not to be construed  or  interpreted  as  exclusions
  because  of the status of the insured as a member of any armed forces or
  attached civilian units, or because of the presence of the insured as  a
  civilian  in  a  combat  area or area adjacent thereto. Such permissible
  exclusions shall be construed and  interpreted  according  to  the  fair
  import  of  their  terms  so as not to exclude deaths due to diseases or
  accidents which are common  to  the  civilian  population  and  are  not
  attributable to special hazards to which a person serving in such forces
  or units is exposed in the line of duty.
    (5) Any such war exclusion shall terminate six months after the end of
  the  war  in  which the insured was engaged or the war which the insured
  was likely to engage in at the time  of  application  for  this  policy,
  after  the  discharge,  release or separation of the insured from active
  military service, after the demobilization of the insured, or after  the
  insured permanently leaves the war area, whichever occurs first. The end
  of  war  shall  be determined by an order of the president of the United
  States or by federal law or shall be deemed to occur  on  the  effective
  date  of  an  agreement  or declaration to end all hostilities which has
  been adopted or accepted by all armed forces involved therein, or in the
  absence of such an  agreement  or  declaration  at  the  end  of  ninety
  continuous days from the end of all hostilities.
    (d)  (1)  Subsections  (b)  and  (c)  hereof  shall  not  apply to any
  provision in a life insurance policy  for  additional  benefits  in  the
  event of accidental death.
    (2)  If  a  policy provides that the death benefit may be increased or
  other policy provisions changed upon the application of the policyholder
  and the production of evidence of  insurability,  the  policy  may  also
  provide that the two-year exclusions permitted under subparagraph (B) or
  (D)  of  paragraph  one  of subsection (b) hereof or subparagraph (C) of
  paragraph one of subsection (c) hereof shall run from the date of  issue
  of  the  policy except that it shall run from the effective date of each
  subsequent increase or change with respect  to  each  such  increase  or
  change.
    (e)  Any  of  the  provisions  of  this  section, or portions thereof,
  exclusive of paragraph eleven of subsection (a) of this section, that do
  not apply to a single premium, nonparticipating, or term  policy,  shall
  to  that  extent  not be incorporated in such policy. This section shall
  not apply to group life insurance.