BILL NUMBER: SB 281 AMENDED
BILL TEXT
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 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.
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 generally
, 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 specify that the term "special benefit" for
purposes of those provisions means an accelerated death benefit that
is added to a life insurance contract to provide for the advance
payment of any part of the death proceeds to the insured upon the
occurrence of certain qualifying events, including if the insured
requires continuous confinement in an eligible institution and is
expected to remain there for the rest of his or her life. The bill
would require that any life insurance provision or supplemental
contract that provides for a special benefit comply with specified
requirements, including, but not limited to, that the provision or
supplemental contract specify that the accelerated death benefit is
fixed at the time the insurer approves the request for the benefit,
and that the provision or supplemental contract is prohibited from
restricting the use of the proceeds of the accelerated death benefit.
Existing law requires supplemental contracts or, if a supplemental
contract is an integral part of a life insurance contract, life
insurance contracts to be submitted for approval by the Insurance
Commissioner before the contracts are delivered or issued for
delivery in this state.
This bill would require a life insurance contract or supplemental
contract that includes an accelerated death benefit and that is
submitted for approval by the Insurance Commissioner to be submitted
for approval with specified additional information, including a
statement of the types of policy forms with which the benefit will be
offered.
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." 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 added to a life
insurance policy to provide 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
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 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.
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 which
contain 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
special 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
which contain 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.
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 a special benefit,
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) (1) A provision or supplemental contract described in
subdivision (a) shall contain all of the provisions set forth in
paragraph (2). 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
provisions required by paragraph (2) 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.
(2) With respect to the benefit standards described in
subdivisions (a) and (b) of Section 10271.1, the following
requirements apply to the supplemental contracts with these benefits:
(A) Either the contract or supplemental contract shall provide
that the contract and the supplemental contract constitute the entire
insurance or annuity contract consistent with paragraph (7) of
subdivision (c) of Section 2534.3 of Title 10 of the California Code
of Regulations, and shall also provide that no agent has the
authority to change the contract or to waive any of its provisions.
This requirement applies without regard to whether the contract is a
variable or nonvariable contract, or a group or individual contract.
This provision shall be preceded individually by a caption stating
"ENTIRE CONTRACT; CHANGES:" or other appropriate caption as the
commissioner may approve.
(B) Either the contract or supplemental contract 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.
This provision shall be preceded individually by a caption stating
"REINSTATEMENT:" or other appropriate caption as the commissioner may
approve.
(C) Supplemental contracts subject to underwriting shall include
an incontestability statement that provides that the insurer shall
not contest the supplemental contract after it has been in force
during the lifetime of the insured for two years from its date of
issue, and may only be contested based on a statement made in the
application for the supplemental contract, if the statement is
attached to the contract. The statement upon which the contest is
made shall be material to the risk accepted or the hazard assumed by
the insurer. This provision shall be preceded individually by a
caption stating "INCONTESTABLE:" or other appropriate caption as the
commissioner may approve.
(D) A provision or supplemental contract described in subdivision
(a) shall also include:
(i) NOTICE OF CLAIM: The insurer may require written notice of
claim no less than 20 days after an occurrence covered by the
provision or supplemental contract, or commencement of any loss
covered by the provision or supplemental contract. 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.
(ii) CLAIM FORMS: The insurer, upon receipt of a notice of claim,
shall furnish to the claimant such 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
provision or supplemental contract as to proof of occurrence or proof
of loss upon submitting, within the time fixed in the provision or
supplemental contract for filing proof of occurrence or proof of
loss, written proof covering the character and the extent of the
occurrence or loss.
(iii) PROOF OF LOSS: 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.
(iv) PHYSICAL EXAMINATIONS: 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.
(c) The commissioner shall review contracts and supplemental
contracts to ensure that the language can be readily understood and
interpreted, and 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 contract or supplemental contract is
offered, delivered, or issued.
(2) Constitutes fraud, unfair trade practices, and insurance
economically unsound to the owner, insured, or annuitant, as
applicable.
(d) A provision or supplemental contract described in subdivision
(a) shall not contain any title, description, or any other indication
that would describe or imply that the policy or supplemental
contract provides long-term care coverage.
(e) Commencing two years from the date of the issuance of the
provision or supplemental contract, no claim for loss incurred or
disability, as defined in the provision or supplemental contract, 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 provision or supplemental contract.
(f) With regard to benefits set forth in Section 10271.1, the
provisions and supplemental contracts shall specify any applicable
exclusions, which shall be limited to the following:
(1) Total disability caused or substantially contributed to by any
attempt at suicide or intentionally self-inflicted injury, while
sane or insane.
(2) Total disability caused or substantially contributed to by war
or an act of war, as defined in the exclusion provisions of the
contract.
(3) Total disability caused or substantially contributed to by
active participation in a riot, insurrection, or terrorist activity.
(4) Total disability caused or substantially contributed to by
committing or attempting to commit a felony.
(5) Total disability 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) Total disability occurring after the policy anniversary or
supplemental contract anniversary, as applicable and as defined in
the policy or supplemental contract, on which the insured attains a
specified age of no less than 65.
(7) Total disability in consequence of the insured being
intoxicated, as defined by the jurisdiction where the total
disability occurred.
(8) Total disability caused or materially contributed to by
engaging in an illegal occupation.
(g) If the commissioner notifies the insurer, in writing, that the
filed form 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. 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) 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 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. This
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,
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) 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.
(d) A provision or supplemental contract 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) 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) With regard to supplemental benefits set forth in Section
10271.1, 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) Condition or loss in consequence of the insured being
intoxicated, as defined by the jurisdiction where the condition or
loss occurred.
(8) Condition or loss caused or materially contributed to by
engaging in an illegal occupation.
(g) If the commissioner notifies the insurer, in writing, that the
filed form 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.
SECTION 1. SEC. 4. Section 10271.1
of the Insurance Code is amended to read:
10271.1. (a) (1) Provisions or supplemental contracts
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 in the contract or supplemental
contract by the supplemental benefit , and
where the waiver continues until the end of the insured's disability,
or until the attainment of an age established by the
insurer 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 in the contract or
supplemental contract 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 in the contract or
supplemental contract 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.
(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 in the provision or supplemental contract,
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 in the contract or
supplemental contract 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) and (e) of Section 10232.8.
(6) Has become involuntarily or voluntarily unemployed.
(c) (1) "Special benefit," as used in this chapter, means an
accelerated death benefit that is added to a life insurance policy to
provide for the advance payment of any part of the death proceeds
payable upon the occurrence of a qualifying event.
(2) For the purposes of this section, "qualifying event" means any
one of the following:
(A) A medical condition that is reasonably expected to result in a
drastically limited life span for the insured.
(B) A medical condition that requires extraordinary medical
intervention, such as major organ transplant or continuous artificial
life support, without which the insured would die.
(C) A condition that usually requires continuous confinement in a
qualified institution and the insured is expected to remain there for
the rest of his or her life.
(D) A specified medical condition that, in the absence of
extensive or extraordinary medical treatment, would result in a
drastically limited life.
(E) A chronic illness, defined as 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) and (e) of Section 10232.8.
(3) Any life insurance provision or supplemental contract that
provides a special benefit as defined in paragraph (1) shall comply
with all of the following:
(A) The provision or supplemental contract shall specify that the
accelerated death benefit is fixed at the time the insurer approves
the request for the accelerated death benefit.
(B) The provision or supplemental contract shall specify that the
payment of the accelerated death benefit is not conditioned on the
receipt of long-term care or medical services.
(C) The provision or supplemental contract shall include the
option to take the accelerated death benefit in a lump sum on the
occurrence of a single qualifying event and may include an option to
receive the benefit in periodic payments for a certain period only.
Periodic payments shall not be based on the continued survival or
institutional confinement of the insured.
(D) The provision or supplemental contract shall not restrict the
use of the proceeds of the accelerated death benefit.
(E) The provision or supplemental contract shall specify that the
payment of the accelerated death benefit is due immediately upon
receipt of the due written proof of eligibility.
(4) A life insurance contract or supplemental contract submitted
for the approval of the commissioner pursuant to Section 10292 shall
be submitted with the following additional information if the
contract includes an accelerated death benefit:
(A) A statement of the types of policy forms with which this
benefit will be offered, any underwriting restrictions involving face
amount or age, and whether the benefit is intended for use with new
issues or in force business.
(B) A specimen issue of the statement regarding the effect of the
accelerated death benefit payment on other benefit provisions, to be
provided to the owner prior to, or concurrent with, the election of
the accelerated death benefit option, and an explanation of how and
when the statement will be provided. The statement shall demonstrate
the effect of the acceleration of the death benefit on the policy
cash value, death benefit, premium, cost of insurance charges, and
loans and liens, as applicable. The statement shall be based only on
guaranteed values. The statement shall also include a disclosure that
receipt of an accelerated death benefit may affect eligibility for
Medicaid or other governmental benefits or entitlements and may have
tax consequences.
(C) An actuarial memorandum prepared, dated, and signed by a
member of the American Academy of Actuaries that includes the
following information:
(i) 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.
(ii) A description of, and justification for, expense charges
associated with the accelerated death benefit and the maximum expense
charges.
(iii) 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: (I) the current yield on 90-day Treasury
bills, or (II) a variable rate determined in accordance with the
National Association of Insurance Commissioners (NAIC) Model Policy
Loan Interest Rate Bill No. 590.
(iv) 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.
(v) 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.
(vi) 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.
(vii) 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.
(viii) 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.
(ix) 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 incidental to the life coverage.
SEC. 2. SEC. 5. Section 10292 of the
Insurance Code is amended to read:
10292. (a) A supplemental contract described in 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 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 described in 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, the insurer shall
submit, for informational purposes, a sample copy of the life
insurance or annuity contract with which the supplemental contract
will be used. To facilitate the location of the required provisions
as stated in paragraph (2) of subdivision (b) 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
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
accelerated death benefit not reimburse or provide specific coverage
for any health, accident, or long-term care insurance benefits.
(b) For the purposes of this article, an "accelerated death
benefit" means a policy added to a life insurance policy to provide
for the advance payment of any part of the death proceeds, payable
upon the occurrence of a single qualifying event.
(1) For the purposes of this article, "qualifying event" means any
of the following:
(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 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 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 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 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.
(3) For the purposes of this article, "applicant" means any of the
following:
(A) In the case of an individual accelerated death benefit policy,
the person who seeks to contract for benefits.
(B) (i) In the case of a group accelerated death benefit policy,
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.
(d) A life insurance policy that accelerates death benefits to
cover long-term care benefits and services, under Section 10231.2,
shall not be considered an accelerated death benefit for the purposes
of this article.
10295.1. A life insurance policy or certificate that provides an
accelerated death benefit as defined in subdivision (b) of Section
10295 shall comply with all of the following:
(a) The policy or certificate shall specify 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 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 the option to take the
accelerated death benefit in a lump sum on the occurrence of a
single qualifying event and may include an option to receive the
benefit in periodic payments 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 the use of the
proceeds of the accelerated death benefit.
(e) The policy or certificate shall specify that the payment of
the accelerated death benefit is due immediately upon receipt of the
due written proof of eligibility.
(f) 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 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.
(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. 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 shall not have long-term care
benefit or service-related features, such as the use of preexisting
condition limitations, or the requirement that benefits be
conditioned on a prior hospitalization or institutionalization.
10295.2. A life insurance contract or supplemental contract
submitted for the approval of the commissioner pursuant to Section
10292 shall be submitted with the following additional information if
the contract includes an accelerated death benefit:
(a) The term "accelerated death benefit" shall be included in the
descriptive title.
(b) A statement of the types of policy forms with which this
benefit will be offered, any underwriting restrictions involving face
amount or age, and whether the benefit is intended for use with new
issues or in force business.
(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) All applications for accelerated death benefit
provisions or supplemental contracts 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 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 coverage."
(c) If an insurer does not complete medical underwriting and
resolve all reasonable questions arising from information submitted
on or with an application before issuing the policy or certificate,
then the insurer may only rescind the 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) The contestability period for an individual policy or
certificate shall comply with subparagraph (C) of paragraph (2) of
subdivision (b) of Section 10271.
(e) A copy of the completed application shall be delivered to the
insured at the time of delivery of the policy or certificate.
10295.4. (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.
(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 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.
(e) The insurer shall provide the policyholder or certificate
holder with a report, at least monthly, of any 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 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 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. (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.
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
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
policy or supplemental contract and the access to the cash value 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, the payment shall not be applied
toward repaying an amount greater than a pro rata portion of any
outstanding policy loans.
10295.6. (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 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 benefit is purchased as a supplemental contract at the
same time as the base policy, then the supplemental contract may be
returned within 30 days. The underlying life insurance policy shall
be otherwise subject to this code.
(b) The return of a policy or certificate shall void the policy or
certificate from the beginning and the parties shall be in the same
position as if no policy, certificate, or contract had been issued.
All premiums paid and any policy fee paid for the policy shall be
fully refunded directly to the applicant by the insurer within 30
days after the policy or certificate is returned.
(c) Policies or certificates 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. (a) (1) Application forms 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) 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 involve replacement of a
life insurance policy subject to this section or of a long-term care
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, a notice
regarding replacement of life insurance or long-term care insurance
coverage with a life insurance policy with an accelerated death
benefit, health insurance, or long-term care insurance coverage. 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
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) 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) The replacement notice shall include the following statement
except when the replacement coverage is group insurance:
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) 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) 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.
10295.8. (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)).
10295.9. 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. 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. (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.
(b) Term life insurance policies shall also include a statement
that the accelerated death benefit terminates with the policy.
10295.12. 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. (a) Except as described in subdivision (b), 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.