BILL NUMBER: SB 281 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 5, 2013
AMENDED IN ASSEMBLY JULY 3, 2013
AMENDED IN SENATE MAY 1, 2013
AMENDED IN SENATE APRIL 1, 2013
INTRODUCED BY Senator Calderon
FEBRUARY 14, 2013
An act to amend Sections 10110.5, 10271.1
10271.1, and 10292 of, to add Article 2.1 (commencing with
Section 10295) to Chapter 4 of Part 2 of Division 2 of, and to repeal
and add Section 10271 of, the Insurance Code, relating to life
insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 281, as amended, Calderon. Life insurance: accelerated death
benefits.
Existing law governs the business of insurance, and defines
various types of insurance for these purposes, including life
insurance and disability insurance. Existing law, except as provided,
makes the requirements imposed on disability insurance contracts
inapplicable to life insurance, endowment, and annuity contracts, or
supplemental contracts thereto, that provide additional benefits in
case of death or dismemberment or loss of sight by accident, or that
operate to safeguard contracts against lapse, or give a special
surrender benefit, or a special benefit, as specified. Existing law
also provides the language required as part of a provision or
supplemental contract governed by these provisions.
This bill would delete the term "special benefit" and replace it
with the defined term "accelerated death benefit." The bill would
generally revise the phrase "provision or supplemental contract" and
replace it with the term "supplemental benefit."
benefit," as defined. The bill would also revise and
recast the required language of the provision or supplemental
contract, as prescribed.
Existing law authorizes the Insurance Commissioner to adopt
reasonable rules and regulations necessary to administer and carry
out the purposes of certain provisions relating to the required
language in a provision or supplemental contract.
This bill would extend that authorization for the commissioner to
adopt reasonable rules and regulations to those provisions relating
to supplemental benefits that operate to safeguard life insurance
contracts against lapse when the insured becomes totally disabled and
those life insurance contracts with an accelerated death benefit.
Existing law authorizes provisions or supplemental contracts that
operate to safeguard life insurance contracts against lapse, in which
the insurer waives the premium or monthly deduction for a life
insurance contract when the insured becomes totally disabled, and
where the waiver continues until the end of the insured's disability,
or until the attainment of an age established by the insurer.
This bill would delete the provision regarding attainment of age
and would instead authorize the waiver of premiums to continue for a
period of time specified in the supplemental benefit. The bill would
define "accelerated death benefit" as a policy provision,
endorsement, or rider added to a life insurance policy
to provide that provides for the advance
payment of any part of the death proceeds, payable upon the
occurrence of a single qualifying event, as
defined. The bill would require a life insurance policy with an
accelerated death benefit provision to comply with and, if
applicable, explain specified requirements, including payment
of benefits, commissioner approval of forms and disclosures, and a
free look period, and would place limits on advertising and
marketing. The bill would prohibit an insurer, broker, agent, or
other person from causing a policyholder to unnecessarily replace a
long-term care insurance policy with an accelerated death
benefit policy, and provide certain notices when a life insurance
policy or long-term care insurance policy would be replaced. The bill
would also provide that an insurer that fails to conform to the
requirements of the above provisions would be subject to the
provisions of existing law that provide for the imposition of a civil
penalty against any person who engages in any unfair method of
competition or any unfair or deceptive act or practice in the
business of insurance, as provided. The bill would prohibit
accelerated death benefits from limiting or excluding coverage by
type of illness, treatment, medical condition, or accident, except as
specified.
The bill would authorize the commissioner to disapprove any
advertising that does not meet the requirements of these provisions,
as specified. The bill would also require a policy, certificate,
rider, or endorsement to include a provision giving the policyholder
or certificate holder the right to appeal to the insurer a decision
regarding benefit eligibility.
This bill would delete obsolete provisions and make conforming
changes.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10110.5 of the Insurance Code is amended to
read:
10110.5. (a) A policy or endorsement issued by an admitted life
and disability insurer may contain a provision for a waiver of
premium payments in the event of involuntary unemployment of the
insured. Insurers issuing policies or endorsements containing that
provision shall establish any additional reserves and file any
additional financial reports that the commissioner may require.
(b) A contract or supplemental contract issued by an admitted life
and disability insurer may contain a provision for a waiver of
surrender charge benefit for a life insurance or annuity contract in
the event of voluntary or involuntary unemployment of the owner,
insured, or annuitant, as applicable. Insurers issuing contracts or
supplemental contracts containing that provision shall establish any
additional reserves and file any additional financial reports that
the commissioner may require.
SEC. 2. Section 10271 of the Insurance Code is repealed.
SEC. 3. Section 10271 is added to the Insurance Code, to read:
10271. (a) Except as set forth in this section, this chapter
shall not apply to, or in any way affect, provisions in life
insurance, endowment, or annuity contracts, or contracts supplemental
thereto, that provide additional benefits in case of death or
dismemberment or loss of sight by accident, or that operate to
safeguard those contracts against lapse, as described in subdivision
(a) of Section 10271.1, or give a special surrender benefit, as
defined in subdivision (b) of Section 10271.1, or an accelerated
death benefit as defined in Article 2.1 (commencing with Section
10295), in the event that the owner, insured, or annuitant, as
applicable, meets the benefit triggers specified in the life
insurance or annuity contract or supplemental contract.
(b) For the purposes of this section, the term "supplemental
benefit" means a rider to or provision in a life insurance policy,
certificate, or annuity contract that provides a benefit as set forth
in subdivision (a).
(b)
( c) A supplemental benefit described in
subdivision (a) shall contain all of the following provisions.
However, an insurer, at its option, may substitute for one or more of
the provisions a corresponding provision of different wording
approved by the commissioner that is not less favorable in any
respect to the owner, insured, or annuitant, as applicable. The
required provisions shall be preceded individually by the appropriate
caption, or, at the option of the insurer, by the appropriate
individual or group captions or subcaptions as the commissioner may
approve.
(1) The supplemental benefit A life
insurance policy or annuity contract that contains a supplemental
benefit shall provide that the contract, supplemental contract,
and any papers attached thereto by the insurer, including the
application if attached, constitute the entire insurance or annuity
contract and shall also provide that no agent has the authority to
change the contract or to waive any of its provisions. This provision
shall be preceded individually by a caption stating "ENTIRE
CONTRACT; CHANGES:" or other appropriate caption as the commissioner
may approve.
(2) The supplemental benefit shall provide for
reinstatement consistent with paragraph (3) of subdivision (c) of
Section 2534.3 of Title 10 of the California Code of Regulations.
This requirement applies without regard to whether the contract is a
variable or nonvariable contract, or a group or individual contract.
Reinstatement of a supplemental benefit shall be on
the same or more favorable terms as those in the underlying policy.
In all other respects, the insured and insurer shall have the same
rights under reinstatement as they had under the supplemental benefit
immediately before the due date of the defaulted premium, subject to
any provisions endorsed in the rider or endorsement or
attached to the rider or endorsement in connection with the
reinstatement. This reinstatement provision shall be
preceded individually by a caption stating "REINSTATEMENT:" or other
appropriate caption as the commissioner may approve.
(3) A supplemental benefit subject to underwriting shall include
an incontestability statement that provides that the insurer shall
not contest the supplemental benefit after it has been in force
during the lifetime of the insured for two years from its date of
issue, and that the supplemental benefit may only be contested based
on a statement made in the application for the supplemental
contract, benefit, if the statement is attached
to the contract and if the statement was material to the risk
accepted or the hazard assumed by the insurer. This provision shall
be preceded individually by a caption stating "INCONTESTABILITY:" or
other appropriate caption as the commissioner may approve.
(4) The supplemental benefit shall provide either that the insurer
may accept written notice of claim at any time or that the insurer
may require that written notice of claim be submitted by a due date
that is no less than 20 days after an occurrence covered by the
supplemental benefit, or commencement of any loss covered by the
supplemental benefit, or as soon after the due date as is reasonably
possible. Notice given by or on behalf of the insured or the
beneficiary, as applicable to the insurer at the insurer's address or
telephone number, or to any authorized agent of the insurer, with
information sufficient to identify the insured, shall be deemed
notice to the insurer. This provision shall be preceded individually
by a caption stating "NOTICE OF CLAIM:" or other appropriate caption
as the commissioner may approve.
(5) The supplemental benefit shall provide that the insurer, upon
receipt of a notice of claim, shall furnish to the claimant those
forms as are usually furnished by it for filing a proof of occurrence
or a proof of loss. If the forms are not furnished within 15 days
after giving notice, the claimant shall be deemed to have complied
with the requirements of the supplemental benefit as to proof of
occurrence or proof of loss upon submitting, within the time fixed by
the supplemental benefit for filing proof of occurrence or proof of
loss, written proof covering the character and the extent of the
occurrence or loss. This provision shall be preceded individually by
a caption stating "CLAIM FORMS:" or other appropriate caption as the
commissioner may approve.
(6) The supplemental benefit shall provide that the insurer may
require that the insured provide written proof of occurrence or proof
of loss no less than 90 days after the termination of the period for
which the insurer is liable, and, in the case of claim for any other
occurrence or loss, within 90 days after the date of the occurrence
or loss. Failure to furnish proof within the time required shall not
invalidate or reduce the claim if it was not reasonably possible to
give proof within the time, provided proof is furnished as soon as
reasonably possible and, except in the absence of legal capacity, no
later than one year from the time proof is otherwise required. This
provision shall be preceded individually by a caption stating "PROOF
OF LOSS:" or other appropriate caption as the commissioner may
approve.
(7) The supplemental benefit shall provide that the insurer, at
its own expense, shall have the right and opportunity to examine the
person of the insured when and as often as the insurer may reasonably
require during the pendency of a claim and to make an autopsy in
case of death where it is not forbidden by law. This provision shall
be preceded individually by a caption stating "PHYSICAL EXAMINATIONS:"
or other appropriate caption as the commissioner may approve.
(c)
( d) The commissioner shall not approve any
contract or supplemental contract for insurance or delivery in this
state if the commissioner finds that the contract or supplemental
contract does any of the following:
(1) Contains any provision, label, description of its contents,
title, heading, backing, or other indication of its provisions that
is unintelligible, uncertain, ambiguous, or abstruse, or likely to
mislead a person to whom the supplemental benefit is offered,
delivered, or issued.
(2) Constitutes fraud, unfair trade practices, or insurance
economically unsound to the owner, insured, or annuitant, as
applicable.
(3) Contains any actuarial information that is significantly
incomplete, incorrect, or inadequate.
(d)
( e) A provision or
supplemental contract benefit described
in subdivision (a) shall not contain any title, description, or any
other indication that would describe or imply that the supplemental
benefit provides long-term care coverage.
(e)
( f) Commencing two years from the date of
the issuance of the supplemental benefit, no claim for loss incurred
or disability, as defined by the supplemental benefit, may be reduced
or denied on the grounds that a disease or physical condition not
excluded from coverage by name or specific description effective on
the date of loss had existed prior to the effective date on the
coverage of the supplemental benefit.
(f)
( g) With regard to supplemental benefits
set forth in Section 10271.1, subdivision
(a), the supplemental benefit shall specify any applicable
exclusions, which shall be limited to the following:
(1) Condition or loss caused or substantially contributed to by
any attempt at suicide or intentionally self-inflicted injury, while
sane or insane.
(2) Condition or loss caused or substantially contributed to by
war or an act of war, as defined in the exclusion provisions of the
contract.
(3) Condition or loss caused or substantially contributed to by
active participation in a riot, insurrection, or terrorist activity.
(4) Condition or loss caused or substantially contributed to by
committing or attempting to commit a felony.
(5) Condition or loss caused or substantially contributed to by
voluntary intake of either:
(A) Any drug, unless prescribed or administered by a physician and
taken in accordance with the physician's instructions.
(B) Poison, gas, or fumes, unless they are the direct result of an
occupational accident.
(6) Condition or loss occurring after the policy anniversary or
supplemental contract anniversary, as applicable and as defined by
the supplemental benefit, on which the insured attains a specified
age of no less than 65 years.
(7)
( 6) Condition or loss in consequence of the
insured being intoxicated, as defined by the jurisdiction where the
condition or loss occurred.
(8)
( 7) Condition or loss caused or
materially substantially contributed to by
engaging in an illegal occupation.
(g)
( h) If the commissioner notifies the
insurer, in writing, that the filed form or actuarial
information does not comply with the requirements of law and
specifies the reasons for his or her opinion, it is unlawful for an
insurer to issue any policy in that form.
SEC. 4. Section 10271.1 of the Insurance Code is amended to read:
10271.1. (a) (1) Supplemental benefits that operate to safeguard
life insurance contracts against lapse are defined as a waiver of
premium benefit or a waiver of monthly deduction benefit, as
applicable, in which the insurer waives the premium or monthly
deduction for a life insurance contract when the insured becomes
totally disabled, as defined by the supplemental benefit, and where
the waiver continues until the end of the insured's disability, or
for the period specified by the supplemental benefit, consistent with
paragraph (5).
(2) For purposes of this subdivision, total disability shall not
be less favorable to the insured than the following:
(A) During the first 24 months of total disability, the insured is
unable to perform with reasonable continuity the substantial and
material duties of his or her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the insured,
due to sickness or bodily injury, is unable to engage with reasonable
continuity in any other job in which he or she could reasonably be
expected to perform satisfactorily in light of his or her age,
education, training, experience, station in life, or physical and
mental capacity.
(3) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(4) The insurer may require total disability to continue for an
uninterrupted period of time specified by the supplemental benefit,
or the insurer may allow separate periods of disability to be
combined.
(5) The waiver of premium or monthly deduction benefit shall
continue for the period specified by the supplemental benefit, but
shall not be less favorable to the insured than the following:
(A) If the insured's total disability begins before the insured
attains 60 years of age, the insurer shall waive all premiums or
monthly deductions due for the period of the total disability, and if
the total disability extends to the insured's attainment of 65 years
of age, the insurer shall waive all further premiums or monthly
deductions due.
(B) If the insured's total disability begins after the age
specified in subparagraph (A), the insurer shall waive all premiums
or monthly deductions due for the period that the insured continues
to be totally disabled up to 65 years of age.
(6) In addition to the permissible exclusions listed in
subdivision (g) of Section 10271, the insurer may exclude a condition
or loss occurring after the policy anniversary or supplemental
contract anniversary, as applicable and as defined by the
supplemental benefit, on which the insured attains a specified age of
no less than 65 years.
(b) "Special surrender benefit" is defined as a "waiver of
surrender charge benefit" wherein the insurer waives the surrender
charge usually charged for a withdrawal of funds from the cash value
of a life insurance contract or the account value of an annuity
contract if the owner, insured, or annuitant, as applicable, meets
any of the following criteria:
(1) Develops any medical condition where the owner's, insured's,
or annuitant's life expectancy is expected to be less than or equal
to a limited period of time that shall not be restricted to a period
of less than 12 months or greater than 24 months.
(2) Is receiving, as prescribed by a physician, registered nurse,
or licensed social worker, home care or community-based services, as
defined in subdivision (a) of Section 10232.9, or is confined in a
skilled nursing facility, convalescent nursing home, or extended care
facility, which shall not be defined more restrictively than as in
the Medicare program, or is confined in a residential care facility
or residential care facility for the elderly, as defined in the
Health and Safety Code. Out-of-state providers of services shall be
defined as comparable in licensure and staffing requirements to
California providers.
(3) Has any medical condition that would, in the absence of
treatment, result in death within a limited period of time, as
defined by the supplemental benefit, but that shall not be restricted
to a period of less than six months.
(4) Is totally disabled, as follows:
(A) During the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, is unable to perform with
reasonable continuity the substantial and material duties of his or
her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, due to sickness or bodily
injury, is unable to engage with reasonable continuity in any other
job in which he or she could reasonably be expected to perform
satisfactorily in light of his or her age, education, training,
experience, station in life, or physical and mental capacity.
(C) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(D) The insurer may require the total disability to continue for
an uninterrupted period of time specified by the supplemental
benefit, or the insurer may allow separate periods of disability to
be combined.
(5) Has a chronic illness as defined pursuant to either
subparagraph (A) or (B):
(A) Either of the following:
(i) Impairment in performing two out of seven activities of daily
living, as set forth in subdivisions (a) and (g) of Section 10232.8,
meaning the insured needs human assistance, or needs continual
substantial supervision.
(ii) The insured has an impairment of cognitive ability, meaning a
deterioration or loss of intellectual capacity due to mental illness
or disease, including Alzheimer's disease or related illnesses, that
requires continual supervision to protect oneself or others.
(B) Either of the following:
(i) Impairment in performing two out of six activities of daily
living as described in subdivisions (b), (d), (e), and (f) of Section
10232.8 due to a loss of functional capacity to perform the
activity.
(ii) Impairment of cognitive ability, meaning the insured needs
substantial supervision due to severe cognitive impairment, as
described in subdivisions (b) , (d), and (e) of Section
10232.8.
(6) Has become involuntarily or voluntarily unemployed.
(c) The term "supplemental benefit" means a rider to or provision
in a life insurance policy, certificate, or annuity contract that
provides a benefit as set forth in subdivision (a) of Section 10271.
SEC. 5. Section 10292 of the Insurance Code is amended to read:
10292. (a) A supplemental contract
benefit described in subdivision (a) of Section
10271 shall not be delivered or issued for delivery to any person in
this state until a copy of the form thereof is submitted to, and
approved by, the commissioner. If the supplemental contract
benefit is an integral part of a contract of
life insurance or annuity, the entire contract shall be submitted to
the commissioner, but his or her power of approval or disapproval,
unless it is otherwise authorized, is limited to the supplemental
portion and any other portions that relate to the supplemental
portion.
(b) A supplemental contract benefit
described in subdivision (a) of Section 10271.1 and
Article 2.1 (commencing with Section 10295) shall be considered an
integral part of a contract for purposes of this section. To
facilitate the review of a supplemental contract,
benefit, the insurer shall submit, for informational
purposes, a sample copy of the life insurance or annuity contract
with which the supplemental contract benefit
will be used. To facilitate the location of the required
provisions as stated in paragraph (2) of
subdivision (b) (c) of Section 10271,
the insurer shall provide the sample copy page reference for the
provisions that appear in the contract.
(c) The commissioner may adopt reasonable rules and regulations as
are necessary to administer and carry out the purposes of Sections
10271 and 10271.1, Article 2.1 (commencing with Section 10295), and
this section.
SEC. 6. Article 2.1 (commencing with Section 10295) is added to
Chapter 4 of Part 2 of Division 2 of the Insurance Code, to read:
Article 2.1. Accelerated Death Benefits
10295. (a) It is the intent of the Legislature that an
An accelerated death benefit, as described in
this section, shall not be offered, sold, issued, or marketed as
health, accident, or long-term care insurance. It is further
the intent of the Legislature that an An
accelerated death benefit shall not reimburse or provide
specific coverage for any health, accident, or long-term care
insurance benefits.
(b) (1) For the purposes of this article, an
"accelerated death benefit" means a policy
provision, endorsement, or rider added to a life insurance
policy to provide that provides for the
advance payment of any part of the death proceeds, payable upon the
occurrence of a single qualifying event in
accordance with Section 10295.1 .
(1)
(2) For the purposes of this article, "qualifying event"
means any of the following: that
subparagraph (A) or (B) applies.
(A) Developing any medical condition where the insured's life
expectancy is expected to be less than, or equal to, a limited period
of time that shall not be restricted to a period of less than 12
months or greater than 24 months. If an insurer wishes to add
additional qualifying events, it may do so as long as the events are
one or more of the following:
(i) A
(A) The insured has a medical
condition that would, in the absence of treatment, result in death
within a limited period of time, as defined by the supplemental
benefit, but that shall not be restricted to a period of less than
six months.
(ii) A
(B) (i) The
insured has a chronic illness as defined in subparagraph (B) of
paragraph (5) of subdivision (b) of Section 10271.1.
(B) Other qualifying events that the commissioner shall approve
for a particular filing.
(C) For accelerated death benefits intended to be tax qualified
under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101
(g)), the
(ii) For purposes of determining
whether this subparagraph applies, the insurer may also require
that a licensed health care practitioner, independent of the
insurer, certifies that the insured meets the definition of
"chronically ill individual" as defined under the federal
Health Insurance Portability and Accountability Act (Public Law
104-191).
(2) For the purposes of this article, "policy" means any policy,
provision, contract, rider, supplemental contract, or endorsement for
accelerated death benefits delivered or issued for delivery in this
state by an insurer, fraternal benefit society, or any similar
organization regulated by the commissioner.
(iii) Nothing in this subdivision shall preclude an insurer from
requiring certification that the chronic illness is expected to be
permanent.
(3) For the purposes of this article, "applicant" means any of the
following:
(A) In the case of an individual accelerated death
benefit life insurance policy with an
accelerated death benefit , the person who seeks to contract
for benefits.
(B) (i) In the case of a group accelerated death benefit
life insurance policy with an accelerated
death benefit , the proposed certificate holder.
(ii) "Certificate" means any certificate issued under a group life
insurance policy that includes an accelerated death benefit
or supplemental benefit.
(c) Accelerated death benefit policies are primarily mortality
risks rather than morbidity risks. The benefits are life insurance
benefits subject to provisions of this code relating to life
insurance products.
(4) For the purposes of this article, the term "supplemental
benefit" means a rider to or provision in a life insurance policy,
certificate, or annuity contract that provides a benefit as set forth
in subdivision (a) of Section 10271.
(d)
(c) A life insurance policy that accelerates death
benefits to cover long-term care benefits and services,
under if the insured is chronically ill and requires
that the insured receives long-term care services described in
Section 10231.2, shall not be considered an accelerated death benefit
for the purposes of this article.
(d) Nothing in this subdivision shall be construed as prohibiting
an insurer from including other riders to a life insurance policy,
such as a terminal illness rider, that are not be subject to this
article.
10295.1. A life insurance policy or certificate that
provides an (a) An
accelerated death benefit as defined in paragraph (1) of
subdivision (b) of Section 10295 shall comply with , and, if
applicable, shall explain all of of,
the following:
(a) The policy or certificate shall specify that
(1) That the accelerated death
benefit is fixed at the time the insurer approves the request for the
accelerated death benefit.
(b) The policy or certificate shall specify that
(2) That the payment of the
accelerated death benefit is not conditioned on the receipt of
long-term care or medical services.
(c) The policy or certificate shall include
(3) That the option to take the
accelerated death benefit in a lump sum on the occurrence of a
single qualifying event and may include
, as well as an option to receive the
benefit in periodic payments is provided for a certain
period only. Periodic payments shall not be based on the
continued survival or institutional confinement of the insured.
(d) The policy or certificate shall not restrict
(4) That there will be no restrictions
on the use of the proceeds of the accelerated death benefit.
(e) The policy or certificate shall specify that
(5) That the payment of the
accelerated death benefit is due immediately upon receipt of the due
written proof of eligibility.
(f) Prior
(6) That, prior to the payment of
the accelerated death benefit, the insurer is required to obtain from
an assignee or irrevocable beneficiary, if any, a signed
acknowledgment of concurrence for payout. If the insurer making the
accelerated death benefit is itself the assignee under the policy,
the acknowledgment is not required.
(g) If
(7) That if any death benefit
remains after payment of an accelerated death benefit, the accidental
death benefit provision, if any, in the policy shall not be affected
by the payment of the accelerated death benefit.
(h) The
policy or certificate shall provide for a maximum amount that may be
accelerated.
(b) The accelerated death benefit shall also provide for all of
the following:
(1) A maximum amount that may be accelerated.
(2) An explanation of whether the insured may accelerate more than
once on a qualifying event up to the maximum amount.
(3) An explanation of whether the insured may accelerate on more
than one of the qualifying events specified in the supplemental
provision up to the maximum amount.
(4) A statement that the policy, rider, endorsement, or
certificate pays proceeds intended for favorable tax treatment under
Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)),
if applicable.
(i) The policy or certificate may pay a daily per diem benefit
without regard to the amount of expenses the insured incurs for
qualified long-term care services.
(c) The insurer shall advise the
policyholder or certificate holder that there may be tax consequences
of accepting an amount above the amount that would be tax qualified
under the Internal Revenue Code.
(j) The policy or certificate
(d) The accelerated death benefit
shall not have long-term care benefit or service-related
features, such as the use of contain any
preexisting condition limitations, or the
limitation and shall not contain any requirement that
benefits acceleration be conditioned on
a prior hospitalization or institutionalization.
(e) The accelerated death benefit shall contain an explanation of
how the insured will pay for the accelerated death benefit, whether
by paying a portion of the premium for the life insurance policy, by
paying a fee at the time of the acceleration, by paying the cost of
insurance charge, or by paying the administrative expense charge,
together with an illustration. If there is a premium or cost of
insurance charge, or a charge imposed upon the acceleration, a
generic illustration numerically demonstrating any effect of the
payment of a benefit on the policy's cash value, accumulation
account, death benefit, premium, policy loans, and policy liens shall
suffice for this purpose.
(f) Every accelerated death benefit that pays proceeds intended
for favorable tax treatment under Section 101(g) of the Internal
Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as such by
prominently displaying and printing that intention on page one of the
accelerated benefit policy provision, rider, endorsement, or
certificate.
10295.2. A life insurance contract or supplemental
contract with an accelerated death benefit shall be
submitted for the approval of the commissioner
pursuant to in the same manner as required
under Section 10292 and shall be submitted with the
following additional information if the contract includes an
accelerated death benefit: information:
(a) The term "accelerated death benefit" shall be included in the
descriptive title of the filing .
(b) A statement of the types of specific
policy forms with which this accelerated death
benefit will be offered, any underwriting restrictions involving face
amount or age, and whether the accelerated death benefit
is intended for use with new issues or in force business , or
both .
(c) Information consistent with the filing requirements in
subdivision (b) of Section 10292.
(d) A written disclosure, including, but not necessarily limited
to, a brief description of the accelerated death benefit and
definitions of the conditions or occurrences triggering payment of
the benefits, shall be given to the applicant. The description shall
include an explanation of any effect of the payment of a benefit on
the policy's cash value, accumulation account, death benefit,
premium, policy loans, and policy liens.
(1) The written disclosure shall also include a statement that
accelerated death benefits are not intended to replace long-term care
benefits, and that the receipt of an accelerated death benefit may
affect eligibility for Medicaid or other governmental benefits or
entitlements and may have tax consequences.
(2) The required notice shall be provided in the following form:
"IMPORTANT NOTICE TO APPLICANT/BUYER REGARDING ACCELERATED DEATH
BENEFITS
The benefits provided by this (provision/supplemental contract)
are not intended to provide, and will never provide, long-term care
insurance, nursing home insurance, or home care insurance. If an
applicant/buyer wants that insurance, the applicant/buyer should
consult with an insurance agent licensed to sell that insurance,
inquire with the insurance company offering the accelerated death
benefits, or visit the California Department of Insurance Internet
Web site (www.insurance.ca.gov) that provides information regarding
long-term care insurance.
Receipt of accelerated death benefits may be taxable. Prior to
electing to buy the accelerated death benefit, policyholders or
certificate holders should seek assistance from a qualified tax
adviser.
Receipt of accelerated death benefits may affect eligibility for
public assistance programs, such as Medi-Cal or Medicaid. Prior to
electing to buy the accelerated death benefit, the applicant/buyer
should consult with the appropriate social services agency concerning
how receipt of accelerated death benefits may affect that
eligibility."
(3) In the case of agent-solicited life insurance, the agent shall
provide the disclosure form to the applicant prior to, or
concurrently with, the application. Acknowledgment of the disclosure
shall be signed by the applicant and the writing agent.
(4) In the case of a solicitation by direct response methods, the
insurer shall provide the disclosure form to the applicant at the
time the policy is delivered, with a notice that a full premium
refund shall be provided to the insured if the policy is returned to
the company within the free look period, pursuant to Section 10295.6.
(5) In the case of group insurance policies, the disclosure form
shall be contained as part of the certificate of coverage or any
related document furnished by the insurer for the certificate holder.
(e) If there is a premium or cost of insurance charge, the insurer
shall give the applicant a generic illustration numerically
demonstrating any effect of the payment of a benefit on the policy's
cash value, accumulation account, death benefit, premium, policy
loans, and policy liens.
(1) In the case of agent-solicited life insurance, the agent shall
provide the illustration to the applicant prior to, or concurrently
with, the application.
(2) In the case of a solicitation by direct response methods, the
insurer shall provide the illustration to the applicant at the time
the policy is delivered.
(3) In the case of group life insurance policies, the disclosure
form shall be contained as part of the certificate of coverage or any
related document furnished by the insurer for the certificate
holder.
(f) An insurer with financing options other than through present
value or a lien approach shall disclose to the policyholder any
premium or cost of insurance charge for the accelerated death
benefit. If the certificate is required to pay any additional premium
or cost of insurance charge, that charge shall be shown on the
specifications page.
(g) The insurer shall disclose to the policyholder any
administrative expense charge.
(h) An insurer shall file with the commissioner an actuarial
memorandum prepared, dated, and signed by a member of the American
Academy of Actuaries that includes all of the following information:
(1) A description of the accelerated death benefit, including the
effects of payment of the accelerated death benefit on all policy
benefits, premium payments, cost of insurance rates, and values,
including any outstanding loan, if applicable, for all types of forms
with which the accelerated death benefit will be used.
(2) A description of, and justification for, expense charges
associated with the accelerated death benefit and the maximum expense
charges.
(3) A description of the interest rate or interest rate
methodology used in any present value calculation or in accruing
interest on the amount of the accelerated death benefit, which shall
not exceed the greater of the current yield on 90-day treasury bills,
or a variable rate determined in accordance with the National
Association of Insurance Commissioners (NAIC) Model Policy Loan
Interest Rate Bill No. 590.
(4) A description of the mortality basis and methodology,
including the period of time applicable to any mortality discount,
used in any present value calculation of the accelerated death
benefit.
(5) A description of the mortality and morbidity basis and
methodology used in the determination of any separate premium or
costs of insurance for the accelerated death benefit.
(6) The formula used to determine the accelerated death benefit,
including any limitations on the amount of the benefit, and the
formula used to determine the postacceleration premium.
(7) A sample calculation of the accelerated death benefit. If the
policy contains a loan provision, the example shall assume that there
is an outstanding loan on the date of acceleration. All policy
benefits, premium payments, cost of insurance charges and values,
including the outstanding loan, if applicable, immediately before and
immediately after acceleration shall be shown in the example.
(8) If an accelerated death benefit may be paid in installments,
the basis used in the calculation of the minimum periodic payment for
the payment period and a sample calculation of a minimum periodic
payment, and the basis used, and a sample calculation of the lump sum
payable if the insured dies before all periodic payments for the
payment period are made.
(9) For any accelerated death benefit of the type other than a
terminal illness, a certification that the value and premium of the
accelerated death benefit is 10 percent or less of the total value of
the benefits over the life of the policy. These values shall be
measured as of the date of issue.
10295.3. (a) A written disclosure, as set forth below, shall be
included with the filing for the commissioner's approval, and shall
be given to each applicant. The same written disclosure shall be
attached to the policy or certificate delivered to the insured.
(b) The required written disclosure shall be in the following
form:
"IMPORTANT NOTICE TO APPLICANT/BUYER REGARDING ACCELERATED DEATH
BENEFITS"
(A) Description of the accelerated death benefit.
(B) Explanation of the qualifying event or events.
(C) Explanation of any effect of the payment of an accelerated
death benefit on the life insurance policy's cash value, accumulation
account, death benefit, premium, policy loans, and policy liens.
(D) Explanation of how the insured will be paying for this
supplemental accelerated death benefit, by paying a portion of the
premium for the life insurance policy, by paying a fee at the time of
the acceleration, by paying the cost of insurance charge, or by
paying the administrative expense charge, together with an
illustration. If there is a premium or cost of insurance charge, or
charge imposed upon acceleration, a generic illustration numerically
demonstrating any effect of the payment of a benefit on the policy's
cash value, accumulation account, death benefit, premium, policy
loans, and policy liens shall suffice for this purpose.
(E) Explanation of whether the portion of the premium on the life
insurance policy attributed to the accelerated death benefit will
ever increase, and if so, how.
(F) Explanation of how acceleration affects the premium for the
life insurance policy or certificate and the effect on the premium
for the accelerated death benefit.
(G) Explanation of whether the insured may accelerate more than
one time within the stated maximum and whether there is any
restriction as to accelerating based on more than one qualifying
event.
(c) The disclosure shall also contain this language, verbatim:
"The benefits provided by this accelerated death benefit are not
intended to provide, and will never provide, long-term care
insurance, nursing home insurance, or home care insurance. If you are
interested in long-term care or nursing home or home care insurance,
you should consult with an insurance agent licensed to sell that
insurance, inquire with the insurance company offering the
accelerated death benefits, or visit the California Department of
Insurance Internet Web site (www.insurance.ca.gov) section regarding
long-term care insurance.
Receipt of accelerated death benefits may be taxable. Prior to
electing to buy the accelerated death benefit, you should seek
assistance from a qualified tax adviser.
Receipt of accelerated death benefits may affect eligibility for
public assistance programs, such as Medi-Cal or Medicaid. Prior to
electing to buy the accelerated death benefit, you should consult
with the appropriate social services agency concerning how receipt of
accelerated death benefits may affect that eligibility."
(d) In the case of agent-solicited life insurance, the agent shall
provide the disclosure form to the applicant prior to, or
concurrently with, the application. Acknowledgment of the applicant's
receipt of the disclosure shall be signed by the applicant and the
writing agent.
(e) In the case of a solicitation by direct response methods, the
insurer shall provide the disclosure form to the applicant together
with the application. A notice that a full premium refund shall be
provided to the insured if the policy is returned to the company
within the free look period, pursuant to Section 10295.8.
(f) In the case of group insurance policies, the disclosure form
shall be delivered together with the application for the certificate,
or with the certificate of coverage or any related document
furnished by the insurer for the certificate holder.
10295.4. An insurer shall file with the commissioner an actuarial
memorandum prepared, dated, and signed by a member of the American
Academy of Actuaries that includes all of the following information:
(a) A description of the accelerated death benefit, including the
effects of payment of the accelerated death benefit on all life
insurance policy benefits and any subsequent accelerated death
benefits, premium payments, cost of insurance rates, and values,
including any outstanding loan, if applicable, for all types of forms
with which the accelerated death benefit will be used.
(b) A description of, and justification for, expense charges
associated with the accelerated death benefit and the maximum expense
charges.
(c) A description of the interest rate or interest rate
methodology used in any present value calculation or in accruing
interest on the amount of the accelerated death benefit, which shall
not exceed the greater of the current yield on 90-day treasury bills,
or a variable rate determined in accordance with the National
Association of Insurance Commissioners (NAIC) Model Policy Loan
Interest Rate Bill No. 590.
(d) A description of the mortality basis and methodology,
including the period of time applicable to any mortality discount,
used in any present value calculation of the accelerated death
benefit.
(e) A description of the mortality and morbidity basis and
methodology used in the determination of any separate premium or
costs of insurance for the accelerated death benefit.
(f) The formula used to determine the accelerated death benefit,
including any limitations on the amount of the benefit, and the
formula used to determine the postacceleration premium for the
accelerated death benefit as well as the life insurance policy.
(g) A sample calculation of the accelerated death benefit. If the
life insurance policy contains a loan provision, the example shall
assume that there is an outstanding loan on the date of acceleration.
All policy and accelerated death benefit benefits, premium payments,
cost of insurance charges and values, including the outstanding
loan, if applicable, immediately before and immediately after
acceleration shall be shown in the example.
(h) If an accelerated death benefit will be paid in installments,
the actuarial memorandum shall explain the basis used in the
calculation of the minimum periodic payment for the payment period
and a sample calculation of a minimum periodic payment, and the basis
used, and a sample calculation of the lump sum payable if the
insured dies before all periodic payments for the payment period are
made.
(i) For any accelerated death benefit of the type other than a
terminal illness, a certification that the value and premium of the
accelerated death benefit is 10 percent or less of the total value of
the benefits over the life of the policy. These values shall be
measured as of the date of issue.
10295.3. 10295.5. (a) All
applications Applications, if any, or forms supporting
an application, if any, for accelerated death benefit
provisions or supplemental contracts benefits
shall contain clear, unambiguous, short, and simple questions
designed to ascertain the health condition of the applicant. Each
question shall contain only one health status inquiry and shall
require only a "yes" or "no" answer, except that the application may
include a request for the name of any prescribed medication and the
name of the prescribing physician. If the application requests the
name of any prescribed medication or the prescribing physician, then
any mistake or omission shall not be used as a basis for the denial
of a claim or the rescission of a the
accelerated death benefit or life insurance policy or
certificate.
(b) The following warning shall be printed conspicuously and in
close conjunction with the applicant's signature block:
"Caution: If your answers on this application are misstated or
untrue, the insurer may have the right to deny benefits or rescind
your accelerated death benefit coverage."
(c) If an insurer does not complete medical underwriting for
the accelerated death benefit separate from underwriting for the life
insurance policy and resolve all reasonable questions arising
from information submitted on or with an application before issuing
the policy or certificate, accelerated death
benefit, then the insurer may only rescind the accelerated
death benefit or life insurance policy or certificate or deny
an otherwise valid claim upon clear and convincing evidence of fraud
or material misrepresentation of the risk by the applicant. The
evidence shall do all of the following:
(1) Pertain to the condition for which benefits are sought.
(2) Involve a chronic condition or involve dates of treatment
before the date of application.
(3) Be material to the acceptance for coverage.
(d) An accelerated death benefit may not be field issued.
(d)
( e) The contestability period for
an individual a life insurance policy or
certificate that contains an accelerated death benefit
shall comply with subparagraph (C) of paragraph
(2) (3) of subdivision (b)
(c) of Section 10271.
(e)
( f) A copy of the completed application
shall be delivered to the insured at the time of delivery of the
life insurance policy or certificate that contains an
accelerated death benefit .
10295.4. 10295.6. (a) When a
policyholder or certificate holder requests an acceleration of death
benefits, the insurer shall send a statement to the policyholder or
certificate holder and irrevocable beneficiary showing any effect
that the payment of the accelerated death benefit would have on the
policy's cash value, accumulation account, death benefit, premium,
policy loans, and policy liens. The statement shall disclose that
receipt of accelerated death benefit payments may adversely affect
the recipient's eligibility for Medicaid or other government benefits
or entitlements. In addition, receipt of an accelerated death
benefit payment may be taxable and assistance should be sought from a
personal tax adviser. When a previous disclosure statement becomes
invalid as a result of an acceleration of the death benefit, the
insurer shall send a revised disclosure statement to the policyholder
or certificate holder and irrevocable beneficiary.
(b) The accelerated death benefit provision shall be
effective for terminal illness on the effective date of the policy or
supplemental contract. The accelerated death benefit
provision shall be effective for other qualifying
events not more than 30 days following the effective date of the
policy or supplemental contract. provision,
rider, endorsement, or certificate.
(c) The insurer may offer a waiver of premium for the accelerated
death benefit provision in the absence of a regular waiver of premium
provision being in effect. At the time the benefit is claimed, the
insurer shall explain any continuing premium requirement to keep the
policy in force.
(d) An insurer shall not unfairly discriminate among insureds with
differing different qualifying events
covered under the policy or among insureds with similar qualifying
events covered under the policy. An insurer shall not apply further
conditions on the payment of the accelerated death benefits other
than those conditions specified in the policy or
supplemental contract. unrestricted accelerated death
benefit.
(e) The insurer shall provide the policyholder or certificate
holder with a report, at least monthly, of any accelerated death
benefits paid out during the prior month, an explanation of
any changes to the policy or certificate, death benefits, and cash
values on account of the benefits being paid out, and the amount of
the remaining benefits that can be accelerated at the end of the
prior month. A The insurer may use
a calendar month or policy or certificate month may
be utilized .
(f) The policy or certificate may provide that any option
otherwise available to the insured to accelerate less than all of the
remaining death benefit on account of a terminal illness diagnosis
shall be suspended while the death benefit is being so accelerated in
accordance with the requirements of this article.
(g) The conversion benefit available to group certificate holders
on termination of employment pursuant to paragraph (2) of subdivision
(a) of Section 10209 shall include a benefit comparable to the
accelerated death benefit. This requirement may be satisfied by a
separate policy or certificate. This requirement, subject to the
approval of the commissioner, may be satisfied by arrangement with
another insurer to provide the required coverage.
(h) When payment of an accelerated death benefit results in a pro
rata reduction in cash value, the payment may be applied toward
repaying a portion of the loan equal to a pro rata portion
of any outstanding policy loans if disclosure of the effect of
acceleration upon any remaining death benefit, cash value or
accumulation account, policy loan, and premium payments, including a
statement of the possibility of termination of any remaining death
benefit, is provided to the policyholder or certificate holder. The
policyholder or certificate holder shall provide written consent
authorizing any other arrangement for the repayment of outstanding
policy loans.
10295.5. 10295.7. (a) The insurer
may require a premium charge or cost of insurance charge for the
accelerated death benefit. This charge shall be based on sound
actuarial principles. In the case of group insurance, the additional
cost may also be reflected in the experience rating.
(b) (1) The insurer may pay a present value of the face amount.
The calculation shall be based on any applicable actuarial discount
appropriate to the policy design. The interest rate or interest rate
methodology used in the calculation shall be based on sound actuarial
principles and disclosed in the contract or actuarial memorandum
required in Section 10295.4 . The maximum interest rate used
shall be no greater than the greater of one of the
following:
(A) The current yield on 90-day treasury bills.
(B) The current maximum statutory adjustable policy loan interest
rate.
(2) The interest rate accrued on the portion of the lien that is
equal in amount to the cash value of the contract at the
time of the life insurance policy at the time of the
supplemental benefit acceleration shall be not more than the
policy loan interest rate stated in the contract.
(c) (1) Except as provided in paragraph (2), when an accelerated
death benefit is payable, there shall not be more than a pro rata
reduction in the cash value based on the percentage of death benefits
accelerated to produce the accelerated death benefit payment.
(2) Alternatively, the payment of accelerated death benefits, any
administrative expense charges, any future premiums, and any accrued
interest can be considered a lien against the death benefit of the
life insurance policy or supplemental contract
and the access to the cash value of
the life insurance policy may be restricted to any
excess of the cash value over the sum of any other outstanding loans
and the lien. Future access to additional policy loans may also be
limited to any excess of the cash value over the sum of the lien and
any other outstanding policy loans.
(d) When payment of an accelerated death benefit results in a pro
rata reduction in the cash value of the life insurance policy
, the payment shall not be applied toward repaying an amount
greater than a pro rata portion of any outstanding policy loans.
10295.6. 10295.8. (a) If an
accelerated death benefit is incorporated into the terms of the
policy or certificate, an applicant for a policy or a certificate
shall have the right to return the accelerated death benefit
policy or certificate by first-class United States mail within
30 days of its delivery and to have the premium refunded if, after
examination of the policy or certificate, the applicant is not
satisfied for any reason. If the accelerated death benefit
is purchased as a supplemental contract an
endorsement or rider at the same time as the base life
insurance policy, then the supplemental contract
endorsement or rider may be returned within 30
days. The underlying life insurance policy shall be otherwise subject
to this code.
(b) The return of a life insurance policy or
certificate that contains an accelerated death benefit, or the
return of an accelerated death benefit rider or endorsement
shall void the life insurance policy or certificate ,
or rider or endorsement from the beginning and the parties
shall be in the same position as if no policy, certificate,
or contract rider, or endorsement had been
issued. All premiums paid and any policy fee paid for the
policy accelerated death benefit shall be fully
refunded directly to the applicant by the insurer within 30 days
after the policy , rider, endorsement, or certificate is
returned.
(c) Policies or , certificates
, riders, or endorsements to which this section applies shall
have a notice prominently printed on the first page of the
policy or certificate , or attached thereto, stating in
substance the conditions described in subdivisions (a) and (b).
10295.7. 10295.9. (a) (1)
Application forms for accelerated
death benefits shall include a question designed to elicit
information as to whether the proposed insurance policy is intended
to replace any long-term care insurance presently in force. A
supplementary application or other form to be signed by the applicant
containing that question may be used.
(2) An insurer that determines that the policy is intended to
replace a similar life policy without a benefit subject to this
section shall follow the procedures in Article 8 (commencing with
Section 10509) of Chapter 5.
(b) (1) An insurer, broker, agent, or other
person shall not cause a policyholder to replace a long-term care
insurance policy unnecessarily. This section shall not be construed
to allow an insurer, broker, agent, or other person to cause a
policyholder to replace a long-term care insurance policy or life
insurance policy subject to this section that will result in a
decrease in benefits and an increase in premium.
(1) For the purposes of this section, "benefits" includes any term
of a life insurance policy, including the availability of obtaining
the benefit in a lump sum, the potential for a remaining death
benefit, or any other favorable characteristic not otherwise
available in a long-term care policy.
(2) It shall be presumed that any third or greater policy sold to
a policyholder in any 12-month period is unnecessary within the
meaning of this section. This section shall not apply to those
instances in which a policy is replaced solely for the purpose of
consolidating policies with a single insurer.
(c) Upon determining that a sale does will
involve a replacement of a life insurance policy
subject to this section or replacement of a long-term care
insurance policy, an insurer, other than an
insurer using direct response solicitation methods, or its
agent shall furnish the applicant, prior to issuance or delivery of a
policy or , certificate, rider, or
endorsement, a notice regarding replacement of life insurance
that includes an accelerated death benefit, or long-term
care insurance coverage with a life insurance policy with
or certificate that contains an accelerated
death benefit, health insurance, or long-term care insurance
coverage benefit . One copy of this notice
shall be retained by the applicant and an additional copy signed by
the applicant shall be retained by the insurer. The required notice
shall be provided in the following form:
"NOTICE TO APPLICANT REGARDING REPLACEMENT OF LIFE
INSURANCE OR PERSONS APPLYING TO REPLACE EXISTING
LONG-TERM CARE INSURANCE OR REPLACE EXISTING LIFE
INSURANCE INCLUDING ACCELERATED DEATH BENEFITS
According to (your application) (information you have furnished),
you intend to lapse or otherwise terminate existing life insurance or
long-term care insurance and replace it with a life insurance policy
with an accelerated death benefit to be issued by (company name)
Insurance Company. Your new accelerated death benefit
coverage provides thirty (30) 30 days
within which you may decide, without cost, whether you desire to keep
the coverage. Please note that your underlying life insurance
policy may only provide for a 10 -day period during which
you may decide, without cost, whether you will keep the coverage.
For your own information and protection, you should be aware
of, and seriously consider, certain factors that may affect the
insurance protection available to you under the new coverage.
This Accelerated Death Benefit accelerated
death benefit is NOT Nursing Home, Home Care, or Long-Term
Care Insurance, and it is not intended or designed to eliminate your
need for that coverage. There are no restrictions or limitations on
the use of the Accelerated Death Benefit
accelerated death benefit proceeds.
If you want that kind of long-term care
insurance, you should consult with an insurance agent licensed
to sell that insurance, inquire with the insurance company offering
the accelerated death benefits, or visit the California Department of
Insurance Internet Web site (www.insurance.ca.gov) that provides
information regarding long-term care insurance.
If you want to replace existing coverage with life insurance that
includes an accelerated death benefit, you should note the following:
Receipt
(1) Receipt of accelerated death
benefits may be taxable. Prior to electing to buy the accelerated
death benefit, policy owners policyholders
or certificate holders should seek assistance from a qualified
tax adviser.
Receipt
(2) Receipt of accelerated death
benefits may affect eligibility for public assistance programs, such
as Medi-Cal or Medicaid. Prior to electing to buy the accelerated
death benefit, the applicant/buyer should consult with the
appropriate social services agency concerning how receipt of
accelerated death benefits may affect that eligibility.
(1) You
You may wish to secure the advice of your present
insurer or its agent regarding the proposed replacement of your
present coverage. This is not only your right, but it is also in your
best interest to make sure you understand all the relevant factors
involved in replacing your present coverage.
(2) If,
If, after due consideration, you still wish to
terminate your present coverage and replace it with new coverage, be
certain to truthfully and completely answer all questions on the
application concerning your medical health history. Failure to
include all material medical information on an application may
provide a basis for the company to deny any future claims and to
refund your premium as though your coverage had never been in force.
After the application has been completed and before you sign it,
reread it carefully to be certain that all the information has been
properly recorded.
The above "Notice to Applicant" was delivered to me on:
(Date)
(Applicant's Signature)"
(d) For group coverage not subject to the 30-day return provision
of Section 10295.6, the notice shall be modified to reflect the
appropriate time period in which the policy may be returned and
premium refunded.
(e)
( d) The replacement notice shall include
the following statement except when the replacement coverage is group
insurance:
COMPARISON
"COMPARISON TO YOUR CURRENT COVERAGE: I have reviewed
your current coverage for the purposes of estate planning
for the need for terminal illness/chronic illness coverage
. To the best of my knowledge, the replacement of insurance involved
in this transaction materially improves your position for the
following reasons:
____ Additional or different benefits
(please specify) ______.
____ No change in benefits, but lower premiums.
____ Fewer benefits and lower premiums.
____Life insurance feature not available in long-term care
insurance (please specify) .
____ Other (please specify) ______.
(Signature of Agent and Name of Insurer)
(Signature of Applicant)
(Date)
(f) Insurers using direct response solicitation methods shall
deliver a notice regarding replacement of life or long-term care
coverage to the applicant upon issuance of the policy or certificate.
The required notice shall be provided in the following form:
"NOTICE TO APPLICANT REGARDING REPLACEMENT OF LIFE INSURANCE OR
LONG-TERM CARE INSURANCE
According to (your application) (information you have furnished),
you intend to lapse or otherwise terminate existing life insurance or
long-term care insurance and replace it with a life insurance policy
with an accelerated death benefit to be issued by (company name)
Insurance Company. Your new coverage provides thirty (30) days within
which you may decide, without cost, whether you desire to keep the
coverage. For your own information and protection, you should be
aware of and seriously consider certain factors that may affect the
insurance protection available to you under the new coverage.
This Accelerated Death Benefit is NOT Nursing Home, Home Care, or
Long-Term Care Insurance, and it is not intended or designed to
eliminate your need for that coverage. There are no restrictions or
limitations on the use of the Accelerated Death Benefit proceeds.
If you want that kind of insurance, you should consult with an
insurance agent licensed to sell that insurance, inquire with the
insurance company offering the accelerated death benefits, or visit
the California Department of Insurance Internet Web site
(www.insurance.ca.gov) that provides information regarding long-term
care insurance.
Receipt of accelerated death benefits may be taxable. Prior to
electing to buy the accelerated death benefit, policy owners or
certificate holders should seek assistance from a qualified tax
adviser.
Receipt of accelerated death benefits may affect eligibility for
public assistance programs, such as Medi-Cal or Medicaid. Prior to
electing to buy the accelerated death benefit, the applicant/buyer
should consult with the appropriate social services agency concerning
how receipt of accelerated death benefits may affect that
eligibility.
(1) You may wish to secure the advice of your present insurer or
its agent regarding the proposed replacement of your present
coverage. This is not only your right, but it is also in your best
interest to make sure you understand all the relevant factors
involved in replacing your present coverage.
(2) (To be included only if the application is attached to the
policy or certificate.) If, after due consideration, you still wish
to terminate your present coverage and replace it with new coverage,
read the copy of the application attached to your new coverage and be
sure that all questions are answered fully and correctly. Omissions
or misstatements in the application may cause an otherwise valid
claim to be denied. Carefully check the application and write to
(company name and address) within thirty (30) days if any information
is not correct and complete, or if any past medical history has been
left out of the application.
(Company Name)"
(g) For group coverage not subject to the 30-day return provision
of Section 10295.6, the notice shall be modified to reflect the
appropriate time period in which the policy may be returned and
premium refunded.
(h) If a group policy is replaced by another group policy issued
to the same policyholder, the succeeding insurer shall offer coverage
consistent with subdivision (g) of Section 10295.4.
(i)
( e) In recommending the purchase or
replacement of any policy or certificate issued under this section,
an agent shall make reasonable efforts to determine the
appropriateness of a recommended purchase or replacement.
(j)
( f) The replacing policy or certificate
shall not contain a provision establishing a new waiting period in
the event existing coverage is converted to, or replaced by, a new or
other form within the same insurer, except with respect to an
increase in benefits voluntarily selected by the insured individual
or group policyholder.
10295.10. With regard to an accelerated death benefit, an insurer
may not:
(a) Cancel, nonrenew, or otherwise terminate an accelerated death
benefit on the grounds of the age or the deterioration of the mental
or physical health of the insured individual or certificate holder.
(b) Terminate a policy, certificate, or rider, or contain a
provision that allows the premium for an in-force policy,
certificate, or rider, to be increased due to the divorce of a
policyholder or certificate holder.
10295.8. (a) An accelerated death benefit policy shall not be
advertised or marketed as long-term care insurance, nursing home
insurance, or home care insurance. Any advertisement, description,
comparison, marketing material, or illustration shall state in bold
that: "This product is a life insurance policy that accelerates the
death benefit for qualified chronic illness or other qualified events
and is not insurance providing long-term care insurance subject to
the minimum requirements of California Law, does not qualify for the
California Partnership for Long-Term Care program, and is not a
Medicare supplement (policy or certificate)." An insurer shall
include in any advertisement or marketing materials for these
insurance policies all of the following:
(1) A statement that the policy or certificate is intended to be a
tax-qualified insurance contract under Section 7702(b) of the
Internal Revenue Code (26 U.S.C. 7702(b)), if applicable.
(2) A description of the benefits provided by the policy,
including a description of the acceleration of the death benefit to
pay an unrestricted cash benefit when the insured has become
chronically ill or otherwise eligible for benefits from a qualified
event.
(3) A comparison between the benefits provided by these policies
and the benefits provided by long-term care insurance.
(b) The statement in paragraph (1) of subdivision (a) may only
appear in an advertisement, description comparison, illustration, or
marketing material for policies or certificates that accelerate death
benefits pursuant to Section 10295 if the policy or certificate is a
tax-qualified insurance contract under Section 7702(b) of the
Internal Revenue Code (26 U.S.C. 7702(b)).
10295.11. (a) An accelerated death benefit shall not be
advertised or marketed as long-term care insurance, nursing home
insurance, or home care insurance. Any advertisement, description,
comparison, marketing material, or illustration shall state in bold
type:
"This is a life insurance benefit that also gives you the option
to accelerate some or all of the death benefit in the event that you
meet the criteria for a qualifying event described in the policy.
This policy or certificate does not provide long-term care insurance
subject to California long-term care insurance law. This policy or
certificate is not a California Partnership for Long-Term Care
program policy. This policy or certificate is not a Medicare
supplement (policy or certificate)."
An insurer shall also include in any advertisement or marketing
materials for these insurance policies all of the following:
(1) A statement that the policy or certificate pays proceeds that
are intended for favorable tax treatment under Section 101(g) of the
Internal Revenue Code (26 U.S.C. Sec. 101(g)), if applicable.
(2) A description of the accelerated death benefits provided by
the policy, including a description of the acceleration of the death
benefit to pay an unrestricted cash benefit when the insured has
become chronically ill or otherwise eligible for benefits from a
qualified event.
(3) A comparison between the benefits provided by life insurance
policies, riders, or endorsements that contain accelerated death
benefits and the benefits provided by long-term care insurance.
(4) The statement in paragraph (1) of subdivision (a) may only
appear in an advertisement, description comparison, illustration, or
marketing material for policies or certificates that accelerate death
benefits pursuant to Section 10295 if the policy pays proceeds that
are intended for favorable tax treatment under Section 101(g) of the
Internal Revenue Code (26 U.S.C. Sec. 101(g)).
(b) Advertising for term life insurance policies or certificates
that contain an accelerated death benefit to be attached to an
existing term life policy shall include a statement that the
accelerated death benefit will terminate with the policy.
(c) On or after January 1, 2014, every insurer offering
accelerated death benefits shall file with the commissioner copies of
all printed advertising for accelerated death benefits that the
insurer proposes to disseminate in the state prior to use of that
material. The commissioner shall have the authority to disapprove any
advertising that does not meet the requirements of this code. If the
commissioner disapproves the advertising, the insurer shall not use
and shall stop using the disapproved advertising. Nothing in this
subdivision shall be construed as requiring prior approval of
advertising prior to dissemination in this state.
10295.12. Insurers shall ensure that agents offering, marketing,
or selling accelerated benefits on their behalf are able to describe
the differences between benefits provided under an accelerated
benefit and benefits provided under long-term care insurance.
Completion of California agent education or continuing education for
long-term care insurance shall be deemed to have met the requirements
of this section.
10295.9. 10295.13. The
In addition to other unfair trade practices described
in this code, the following acts and practices in the sale of
insurance under this article are prohibited:
(a) Twisting. Knowingly making any misleading representation or
incomplete or fraudulent comparison of any insurance policies or
insurers for the purpose of inducing, or tending to induce, any
person to lapse, forfeit, surrender, terminate, retain, pledge,
assign, borrow on or convert any insurance policy, or to take out a
policy of insurance with another insurer.
(b) High pressure tactics. Employing any method of marketing
having the effect of, or tending to, induce the purchase of insurance
through force, fright, threat, whether explicit or implied, or undue
pressure to purchase or recommend the purchase of insurance.
(c) Cold lead advertising. Making use directly or indirectly of
any method of marketing that fails to disclose in a conspicuous
manner that a purpose of the method of marketing is solicitation of
insurance and that contact will be made by an insurance agent or
insurance company.
10295.10. 10295.14. An individual
accelerated death benefit policy or certificate
shall not be issued unless it meets the requirements of Section
10113.72 regarding unintentional lapse.
10295.11. 1029 5.15. (a)
Except at the request of the policyholder or contract holder, all
accelerated death benefit provisions or supplemental contracts shall
be renewable for the life of the underlying life insurance policy
, provided the premiums are timely paid. The statement shall be
prominently displayed on the first page of the accelerated death
benefit policy or rider .
(b) Term life insurance policies shall also include a statement
that the accelerated death benefit terminates with the policy.
10295.12. 10295.16. Termination of
the accelerated death benefit provision shall be without prejudice to
any benefits payable for any claim if the claim began while the
accelerated death benefit provision was in force and continues
without interruption after termination. An extension of
benefits beyond the period the insurance was in force may be limited
to the duration of the benefit period, if any, or to payment of the
maximum benefits and may be subject to any policy waiting period, and
all other applicable provisions of the insurance policy.
10295.13. 10295.17. (a)
Except as described in
subdivision (b), an An insurer that fails to
conform to the requirements provided under this article shall be
subject to Article 6.5 (commencing with Section 790) of Chapter 1 of
Part 2 of Division 1.
(b) A violation of this article is not subject to subdivision (d)
of Section 790.036.
10295.18. Accelerated death benefits shall not limit or exclude
coverage by type of illness, treatment, medical condition, or
accident, except under the circumstances described in paragraphs (1)
to (4), inclusive, of subdivision (g) of Section 10271.
10295.19. A policy, certificate, rider, or endorsement shall
include a provision giving the policyholder or certificate holder the
right to appeal to the insurer a decision regarding benefit
eligibility.