BILL NUMBER: AB 1747 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 26, 2012
INTRODUCED BY Assembly Member Feuer
FEBRUARY 17, 2012
An act to amend Section 10173.2 of, and to add Sections
10113.71 and 10113.72 to, the Insurance Code, relating to life
insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1747, as amended, Feuer. Life insurance: nonpayment premium
lapse: notice.
Existing law requires that life insurance policies contain certain
provisions, including, but not limited to, an individual life
insurance policy notice of the right to cancel a policy. Existing law
requires life insurers to provide certain notices to individual life
insurance policyholders, including, but not limited to, a notice of
premium increases.
This bill would require that every life insurance policy issued or
delivered in this state contain a provision for a grace period of
not less than 60 days from the premium due date that provides that
where the premium owed is paid fully within the grace period the
policy remains in force and a provision that gives the applicant the
right to designate at least one individual
person , in addition to the applicant, to receive notice of
lapse or termination of a policy for nonpayment of premium.
The bill would require that every life insurance policy issued or
delivered in this state, except group life insurance, contain a
provision for the reinstatement of the policy at any time within 2
years from the date of default upon the written application of the
insured and evidence of insurability, including good health,
satisfactory to the insurer, and payment of amounts owed since the
date of the default. The bill would prohibit a notice of
cancellation pending lapse and termination
from being effective unless mailed by the insurer to the named
insured, a named designee, and a known assignee ,
or additional other person having
an interest in the policy at least 30 days prior to
the effective date of cancellation where cancellation
termination if termination is for nonpayment of
premium. The bill would also make conforming changes.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10113.71 is added to the Insurance Code, to
read:
10113.71. (a) (1) Every
life insurance policy issued or delivered in this state shall contain
a provision for a grace period of not less than 60 days from the
premium due date that provides that where .
The provision shall provide that if the premium owed
is fully paid within the grace period the policy shall remain in
force.
(2) Every life insurance policy issued or delivered in this state,
except group life insurance, shall contain a provision that the
policy shall be reinstated at any time within two years from the date
of default upon the written application of the insured and evidence
of insurability, including good health, satisfactory to the insurer,
and payment of amounts owed since the date of the default.
(b) (1) A notice of cancellation pending
lapse and termination of a life insurance policy shall not be
effective unless mailed by the insurer to the named insured, a
designee named pursuant to Section 10113.72, and a known
assignee, or additional other person having
an interest in the policy , at least 30
days prior to the effective date of cancellation where
cancellation termination if termination is for
nonpayment of premium.
(2) This subdivision shall not apply to nonrenewal.
(3) Notice shall be given to the insured and to the designee
by first-class United States mail, postage prepaid, not less
than 30 days after a premium is due and unpaid. However, notices made
to assignees pursuant to this section may be done electronically
with consent of the assignee.
(c) For purposes of this section, a life insurance policy
includes, but is not limited to, an individual life insurance policy
, an individual variable life insurance policy,
and a group life insurance policy, except where otherwise provided.
SEC. 2. Section 10113.72 is added to the Insurance Code, to read:
10113.72. (a) An individual life insurance policy shall not be
issued or delivered in this state until the applicant has been given
the right to designate at least one individual
person , in addition to the applicant, to receive notice
of lapse or termination of a policy for nonpayment of premium. The
insurer shall receive from each applicant one of the
following:(1) A
a written designation listing the name, address, and telephone
number of at least one individual person
, in addition to the applicant, who is to receive notice of
lapse or termination of the policy for nonpayment of premium.
(2) A waiver signed and dated by the applicant electing not to
designate additional persons to receive notice. The required waiver
shall read as follows:
"Protection Against Unintended Lapse.
I understand that I have the right to designate at least one
person other than myself to receive notice of lapse or termination of
this life insurance policy for nonpayment of premium. I understand
that notice will not be given until 30 days after a premium is due
and unpaid. I elect not to designate a person to receive the notice.
Signature of Applicant
Date
(b) The insurer shall notify the insured of the right to change
the written designation , no less often than once every two
years or designate one or more persons, if the insured
did not designate a person at the time the policy took effect, when
the insured's premium is due. The insured may change the designation
more often if he or she chooses to do so .
(c) No individual life insurance policy shall lapse or be
terminated for nonpayment of premium unless the insurer, at least 30
days prior to the effective date of the lapse or termination, gives
notice to the insured and to the individual
person or individuals persons
designated pursuant to subdivision (a), at the address provided by
the insured for purposes of receiving notice of lapse or termination.
Notice shall be given by first-class United States mail, postage
prepaid, not less than 30 days after a premium is due and unpaid.
(d) Each individual life insurance policy shall include a
provision that, in the event of lapse, provides for reinstatement of
coverage, if the insurer is provided with proof of the insured's
cognitive impairment or the loss of functional capacity. This option
shall be available to the insured if requested within five months
after termination and shall allow for the collection of a past due
premium, where appropriate. The standard of proof of cognitive
impairment or loss of functional capacity shall not be more stringent
than the benefit eligibility criteria on cognitive impairment or the
loss of functional capacity contained in the policy.
SEC. 3. Section 10173.2 of the Insurance Code is amended to read:
10173.2. When a policy of life insurance is, after the effective
date of this section, assigned in writing as security for an
indebtedness, the insurer shall, in any case in which it has received
written notice of the name and address of the assignee, mail to the
assignee a written notice, postage prepaid and addressed to the
assignee's address filed with the insurer, not less than 30 days
prior to the final lapse of the policy, each time the insured has
failed or refused to transmit a premium payment to the insurer before
the commencement of the policy's grace period or before the notice
is mailed. The insurer shall give that notice to the assignee in the
proper case while the assignment remains in effect, unless the
assignee has notified the insurer in writing that the notice is
waived. The insurer shall be permitted to charge the insured directly
or against the policy the reasonable cost of complying with this
section, but in no event to exceed two dollars and fifty cents
($2.50) for each notice.
As used in this section, "final lapse of the policy" means the
date after which the policy will not be reinstated by the insurer
without requiring evidence of insurability or written application.