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
begin delete benefit.”end delete 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
begin delete to provideend delete for the advance payment of any part of the death proceeds, payable upon the occurrence of a begin delete singleend delete 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 10110.5 of the Insurance Code is
2amended to read:
(a) A policy or endorsement issued by an admitted
4life and disability insurer may contain a provision for a waiver of
5premium payments in the event of involuntary unemployment of
6the insured. Insurers issuing policies or endorsements containing
7that provision shall establish any additional reserves and file any
8additional financial reports that the commissioner may require.
9(b) A contract or supplemental contract issued by an admitted
10life and disability insurer may contain a provision for a waiver of
11surrender charge benefit for a life insurance or annuity contract in
12the event of voluntary or involuntary unemployment of the owner,
13insured, or annuitant, as applicable. Insurers issuing contracts or
14supplemental contracts containing that provision shall establish
15 any additional reserves and file any additional financial reports
16that the commissioner may require.
Section 10271 of the Insurance Code is repealed.
Section 10271 is added to the Insurance Code, to read:
(a) Except as set forth in this section, this chapter shall
20not apply to, or in any way affect, provisions in life insurance,
21endowment, or annuity contracts, or contracts supplemental thereto,
22that provide additional benefits in case of death or dismemberment
23or loss of sight by accident, or that operate to safeguard those
24contracts against lapse, as described in subdivision (a) of Section
2510271.1, or give a special surrender benefit, as defined in
P4 1subdivision (b) of Section 10271.1, or an accelerated death benefit
2as defined in Article 2.1 (commencing with Section 10295), in the
3event that the owner, insured, or annuitant, as applicable, meets
4the benefit triggers specified in the life insurance or annuity
5contract or supplemental contract.
11 A supplemental benefit described in subdivision (a) shall
12contain all of the following provisions. However, an insurer, at its
13option, may substitute for one or more of the provisions a
14corresponding provision of different wording approved by the
15commissioner that is not less favorable in any respect to the owner,
16insured, or annuitant, as applicable. The required provisions shall
17be preceded individually by the appropriate caption, or, at the
18option of the insurer, by the appropriate individual or group
19captions or subcaptions as the commissioner may approve.
begin deleteThe supplemental benefit end deleteshall provide that
22the contract, supplemental contract, and any papers attached thereto
23by the insurer, including the application if attached, constitute the
24entire insurance or annuity contract and shall also provide that no
25agent has the authority to change the contract or to waive any of
26its provisions. This provision shall be preceded individually by a
27caption stating “ENTIRE CONTRACT; CHANGES:” or other
28appropriate caption as the commissioner may approve.
begin deleteThe supplemental benefit shall provide for reinstatement
30consistent with paragraph (3) of subdivision (c) of Section 2534.3
31of Title 10 of the California Code of Regulations. This requirement
32applies without regard to whether the contract is a variable or
33nonvariable contract, or a group or individual contract. end delete
P5 1This provision shall be preceded individually by a
2caption stating “REINSTATEMENT:” or other appropriate caption
3as the commissioner may approve.
4(3) A supplemental benefit subject to underwriting shall include
5an incontestability statement that provides that the insurer shall
6not contest the supplemental benefit after it has been in force during
7the lifetime of the insured for two years from its date of issue, and
8that the supplemental benefit may only be contested based on a
9statement made in the application for the supplemental
begin delete contract, end delete
10if the statement is attached to the contract and if the
11statement was material to the risk accepted or the hazard assumed
12by the insurer. This provision shall be preceded individually by a
13caption stating “INCONTESTABILITY:” or other appropriate
14caption as the commissioner may approve.
15(4) The supplemental benefit shall provide either that the insurer
16may accept written notice of claim at any time or that the insurer
17may require that written notice of claim be submitted by a due date
18that is no less than 20 days after an occurrence covered by the
19supplemental benefit, or commencement of any loss covered by
20the supplemental benefit, or as soon after the due date as is
21reasonably possible. Notice given by or on behalf of the insured
22or the beneficiary, as applicable to the insurer at the insurer’s
23address or telephone number, or to any authorized agent of the
24insurer, with information sufficient to identify the insured, shall
25be deemed notice to the insurer. This provision shall be preceded
26individually by a caption stating “NOTICE OF CLAIM:” or other
27appropriate caption as the commissioner may approve.
28(5) The supplemental benefit shall provide that the insurer, upon
29receipt of a notice of claim, shall furnish to the claimant those
30forms as are usually furnished by it for filing a proof of occurrence
31or a proof of loss. If the forms are not furnished within 15 days
32after giving notice, the claimant shall be deemed to have complied
33with the requirements of the supplemental benefit as to proof of
34occurrence or proof of loss upon submitting, within the time fixed
35by the supplemental benefit for filing proof of occurrence or proof
36of loss, written proof covering the character and the extent of the
37occurrence or loss. This provision shall be preceded individually
38by a caption stating “CLAIM FORMS:” or other appropriate
39caption as the commissioner may approve.
P6 1(6) The supplemental benefit shall provide that the insurer may
2require that the insured provide written proof of occurrence or
3proof of loss no less than 90 days after the termination of the period
4for which the insurer is liable, and, in the case of claim for any
5other occurrence or loss, within 90 days after the date of the
6occurrence or loss. Failure to furnish proof within the time required
7shall not invalidate or reduce the claim if it was not reasonably
8possible to give proof within the time, provided proof is furnished
9as soon as reasonably possible and, except in the absence of legal
10capacity, no later than one year from the time proof is otherwise
11required. This provision shall be preceded individually by a caption
12stating “PROOF OF LOSS:” or other appropriate caption as the
13commissioner may approve.
14(7) The supplemental benefit shall provide that the insurer,
15its own expense, shall have the right and opportunity to examine
16the person of the insured when and as often as the insurer may
17reasonably require during the pendency of a claim and to make an
18autopsy in case of death where it is not forbidden by law. This
19provision shall be preceded individually by a caption stating
20“PHYSICAL EXAMINATIONS:” or other appropriate caption
21as the commissioner may approve.
23 The commissioner shall not approve any contract or
24supplemental contract for insurance or delivery in this state if the
25commissioner finds that the contract or supplemental contract does
26any of the following:
27(1) Contains any provision, label, description of its contents,
28title, heading, backing, or other indication of its provisions that is
29unintelligible, uncertain, ambiguous, or abstruse, or likely to
30mislead a person to whom the supplemental benefit is offered,
31delivered, or issued.
32(2) Constitutes fraud, unfair trade practices, or insurance
33economically unsound to the owner, insured, or annuitant, as
begin delete provision orend delete
supplemental begin delete contractend delete described in
39subdivision (a) shall not contain any title, description, or any other
P7 1indication that would describe or imply that the supplemental
2benefit provides long-term care coverage.
4 Commencing two years from the date of the issuance of the
5supplemental benefit, no claim for loss incurred or disability, as
6defined by the supplemental benefit, may be reduced or denied on
7the grounds that a disease or physical condition not excluded from
8coverage by name or specific description effective on the date of
9loss had existed prior to the effective date on the coverage of the
12 With regard to supplemental benefits set forth in
begin delete Section the supplemental benefit shall specify
14any applicable exclusions, which shall be limited to the following:
15(1) Condition or loss caused or substantially contributed to by
16any attempt at suicide or intentionally self-inflicted injury, while
17sane or insane.
18(2) Condition or loss caused or substantially contributed to by
19war or an act of war, as defined in the exclusion provisions of the
21(3) Condition or loss caused or substantially contributed to by
22active participation in a riot, insurrection, or terrorist activity.
23(4) Condition or loss caused or substantially contributed to by
24committing or attempting to commit a felony.
25(5) Condition or loss caused or substantially contributed to by
26voluntary intake of either:
27(A) Any drug, unless prescribed or administered by a physician
28and taken in accordance with the physician’s instructions.
29(B) Poison, gas, or fumes, unless they are the direct result of an
31(6) Condition or loss occurring after the policy anniversary or
32supplemental contract anniversary, as applicable and as defined
33by the supplemental benefit, on which the insured attains a
34specified age of no less than 65 years.
36 Condition or loss in consequence of the insured being
37intoxicated, as defined by the jurisdiction where the condition or
P8 1 Condition or loss caused or
begin delete materiallyend delete
2 contributed to by engaging in an illegal occupation.
4 If the commissioner notifies the insurer, in writing, that the
5filed form does not comply with the
6requirements of law and specifies the reasons for his or her opinion,
7it is unlawful for an insurer to issue any policy in that form.
Section 10271.1 of the Insurance Code is amended to
(a) (1) Supplemental benefits that operate to
11safeguard life insurance contracts against lapse are defined as a
12waiver of premium benefit or a waiver of monthly deduction
13benefit, as applicable, in which the insurer waives the premium or
14monthly deduction for a life insurance contract when the insured
15becomes totally disabled, as defined by the supplemental benefit,
16and where the waiver continues until the end of the insured’s
17disability, or for the period specified by the supplemental benefit,
18consistent with paragraph (5).
19(2) For purposes of this subdivision, total disability shall not be
20less favorable to the insured than the following:
21(A) During the first 24 months of
total disability, the insured is
22unable to perform with reasonable continuity the substantial and
23material duties of his or her job due to sickness or bodily injury.
24(B) After the first 24 months of total disability, the insured, due
25to sickness or bodily injury, is unable to engage with reasonable
26continuity in any other job in which he or she could reasonably be
27expected to perform satisfactorily in light of his or her age,
28education, training, experience, station in life, or physical and
30(3) The definition of total disability may also include
31presumptive total disability, such as the insured’s total and
32permanent loss of sight of both eyes, hearing of both ears, speech,
33the use of both hands, both feet, or one hand and one foot.
34(4) The insurer may require total disability to continue for an
35 uninterrupted period of time specified by the supplemental benefit,
36or the insurer may allow separate periods of disability to be
38(5) The waiver of premium or monthly deduction benefit shall
39continue for the period specified by the supplemental benefit, but
40shall not be less favorable to the insured than the following:
P9 1(A) If the insured’s total disability begins before the insured
2attains 60 years of age, the insurer shall waive all premiums or
3monthly deductions due for the period of the total disability, and
4if the total disability extends to the insured’s attainment of 65 years
5of age, the insurer shall waive all further premiums or monthly
7(B) If the insured’s total disability begins after the age specified
8in subparagraph (A), the insurer shall waive all premiums or
9monthly deductions due for the period that the insured continues
10to be totally disabled up to 65 years of age.
17(b) “Special surrender benefit” is defined as a “waiver of
18surrender charge benefit” wherein the insurer waives the surrender
19charge usually charged for a withdrawal of funds from the cash
20value of a life insurance contract or the account value of an annuity
21contract if the owner, insured, or annuitant, as applicable, meets
22any of the following criteria:
23(1) Develops any medical condition where the owner’s,
24insured’s, or annuitant’s life expectancy is expected to be less than
25or equal to a limited period of time that shall not be restricted to
26a period of less than 12 months or greater than 24 months.
27(2) Is receiving, as prescribed by a physician, registered nurse,
28or licensed social worker, home care or community-based services,
29as defined in subdivision (a) of Section 10232.9, or is confined in
30a skilled nursing facility, convalescent nursing home, or extended
31care facility, which shall not be defined more restrictively than as
32in the Medicare program, or is confined in a residential care facility
33or residential care facility for the elderly, as defined in the Health
34and Safety Code. Out-of-state providers of services shall be defined
35as comparable in licensure and staffing requirements to California
37(3) Has any medical condition that would, in the absence of
38treatment, result in death within a limited period of time, as defined
39by the supplemental benefit, but that shall not be restricted to a
40period of less than six months.
P10 1(4) Is totally disabled, as follows:
2(A) During the first 24 months of total disability, the owner,
3insured, or annuitant, as applicable, is unable to perform with
4reasonable continuity the substantial and material duties of his or
5her job due to sickness or bodily injury.
6(B) After the first 24 months of total disability, the owner,
7insured, or annuitant, as applicable, due to sickness or bodily injury,
8is unable to engage with reasonable continuity in any other job in
9which he or she could reasonably be expected to perform
10 satisfactorily in light of his or her age, education, training,
11experience, station in life, or physical and mental capacity.
12(C) The definition of total disability may also include
13presumptive total disability, such as the insured’s total and
14permanent loss of sight of both eyes, hearing of both ears, speech,
15the use of both hands, both feet, or one hand and one foot.
16(D) The insurer may require the total disability to continue for
17an uninterrupted period of time specified by the supplemental
18benefit, or the insurer may allow separate periods of disability to
20(5) Has a chronic illness as defined pursuant to either
21subparagraph (A) or (B):
22(A) Either of the following:
23(i) Impairment in performing two out of seven activities of daily
24living, as set forth in subdivisions (a) and (g) of Section 10232.8,
25meaning the insured needs human assistance, or needs continual
27(ii) The insured has an impairment of cognitive ability, meaning
28a deterioration or loss of intellectual capacity due to mental illness
29or disease, including Alzheimer’s disease or related illnesses, that
30requires continual supervision to protect oneself or others.
31(B) Either of the following:
32(i) Impairment in performing two out of six activities of daily
33living as described in subdivisions (b), (d), (e), and (f) of Section
3410232.8 due to a loss of functional capacity to perform the activity.
35(ii) Impairment of cognitive
ability, meaning the insured needs
36substantial supervision due to severe cognitive impairment, as
37described in subdivisions (b) and (e) of Section 10232.8.
38(6) Has become involuntarily or voluntarily unemployed.
Section 10292 of the Insurance Code is amended to
(a) A supplemental
begin delete contractend delete described in
6 Section 10271 shall not be delivered or issued
7for delivery to any person in this state until a copy of the form
8thereof is submitted to, and approved by, the commissioner. If the
begin delete contractend delete is an integral part of a contract of
10life insurance or annuity, the entire contract shall be submitted to
11the commissioner, but his or her power of approval or disapproval,
12unless it is otherwise authorized, is limited to the supplemental
13portion and any other portions that relate to the supplemental
15(b) A supplemental
begin delete contractend delete described in Section 10271.1 and Article 2.1 (commencing with Section
1710295) shall be considered an integral part of a contract for
18purposes of this section. To facilitate the review of a supplemental
begin delete contract,end delete the insurer shall submit, for informational
20purposes, a sample copy of the life insurance or annuity contract
21with which the supplemental
begin delete contractend delete will be used. To
22facilitate the location of the required provisions as stated in
begin delete paragraph (2) ofend delete subdivision begin delete (b)end delete of Section 10271, the insurer
24shall provide the sample copy page reference for the provisions
25that appear in the contract.
26(c) The commissioner may adopt reasonable
27regulations as are necessary to administer and carry out the
28purposes of Sections 10271 and 10271.1, Article 2.1 (commencing
29with Section 10295), and this section.
Article 2.1 (commencing with Section 10295) is added
31to Chapter 4 of Part 2 of Division 2 of the Insurance Code, to read:
begin deleteIt is the intent of the Legislature that an end delete
36accelerated death benefit, as described in this section, shall not be
37offered, sold, issued, or marketed as health, accident, or long-term
begin delete It is further the intent of the Legislature that anend delete
39 accelerated death benefit not reimburse or provide specific
P12 1coverage for any health, accident, or long-term care insurance
3(b) For the purposes of this article, an “accelerated death
4benefit” means a
begin delete policyend delete added
5to a life insurance policy
begin delete to provideend delete for the advance
6payment of any part of the death proceeds, payable upon the
7occurrence of a
begin delete singleend delete qualifying event.
10 For the purposes of this article, “qualifying event” means
begin delete any of the following:end delete
12(A) Developing any medical condition where the insured’s life
13expectancy is expected to be less than, or equal to, a limited period
14of time that shall not be restricted to a period of less than 12 months
15or greater than 24 months. If an insurer wishes to add additional
16qualifying events, it may do so as long as the events are one or
17more of the following:
18(i) Aend delete
19 medical condition that would, in the
20absence of treatment, result in death within a limited period of
21time, as defined by the supplemental benefit, but that shall not be
22restricted to a period of less than six months.
23(ii) Aend delete
chronic illness as defined in
25subparagraph (B) of paragraph (5) of subdivision (b) of Section
27(B) Other qualifying events that the commissioner shall approve
28for a particular filing.
29(C) For accelerated death benefits intended to be tax qualified
30under Section 101(g) of the Internal Revenue Code (26 U.S.C.
31Sec. 101(g)), the
insurer may also require that a licensed health care
34practitioner, independent of the insurer, certifies that the insured
35meets the definition of “chronically ill individual” as defined under
36the Health Insurance Portability and Accountability Act
37(Public Law 104-191).
38(2) For the purposes of this article, “policy” means any policy,
39provision, contract, rider, supplemental contract, or endorsement
40for accelerated death benefits delivered or issued for delivery in
P13 1this state by an insurer, fraternal benefit society, or any similar
2organization regulated by the commissioner.
6(3) For the purposes of this article, “applicant” means any of
8(A) In the case of an individual
begin delete accelerated death benefitend delete policy, the person
10who seeks to contract for benefits.
11(B) (i) In the case of a group
begin delete accelerated death benefitend delete
policy, the proposed
14(ii) “Certificate” means any certificate issued under a group life
15insurance policy that includes an accelerated death
begin delete benefit or benefit.
17 (c) Accelerated death benefit policies are primarily mortality
18risks rather than morbidity risks. The benefits are life insurance
19benefits subject to provisions of this code relating to life insurance
26 A life insurance policy that accelerates death benefits
begin delete to Section 10231.2, shall not be considered
27cover long-term care benefits and services, underend delete
30an accelerated death benefit for the purposes of this article.
begin deleteA life insurance policy or certificate that provides an end delete
36accelerated death benefit as defined in
37 subdivision (b) of Section 10295 shall comply with all
begin delete ofend delete
39(a) The policy or certificate shall specify thatend delete
P14 1 the accelerated death benefit is fixed at the time the
2insurer approves the request for the accelerated death benefit.
3(b) The policy or certificate shall specify thatend delete
4 the payment of the accelerated death benefit is not
5conditioned on the receipt of long-term care or medical services.
6(c) The policy or certificate shall includeend delete
7 the option to take the accelerated death benefit in a
8lump sum on the occurrence of a
begin deletesingle end deletequalifying event begin delete and may
an option to receive the benefit in periodic
10payments for a certain period only.
begin delete Periodic payments
11shall not be based on the continued survival or institutional
12confinement of the insured.end delete
13(d) The policy or certificate shall not restrictend delete
14 the use of the proceeds
15of the accelerated death benefit.
16(e) The policy or certificate shall specify thatend delete
17 the payment of the accelerated death benefit is due
18immediately upon receipt of the due written proof of eligibility.
19(f) Priorend delete
20 to the payment of the accelerated death benefit,
21the insurer is required to obtain from an assignee or irrevocable
22beneficiary, if any, a signed acknowledgment of concurrence for
23payout. If the insurer making the accelerated death benefit is itself
24the assignee under the policy, the acknowledgment is not required.
25(g) Ifend delete
26 any death benefit remains after payment of an
27accelerated death benefit, the accidental death benefit provision,
28if any, in the policy shall not be affected by the payment of the
29accelerated death benefit.
30(h) The policy or certificate shall provide for a maximum amount
31that may be accelerated.
5(i) The policy or certificate may pay a daily per diem benefit
6without regard to the amount of expenses the insured incurs for
7qualified long-term care services.
insurer shall advise the policyholder or certificate holder
9that there may be tax consequences of accepting an amount above
10the amount that would be tax qualified under the Internal Revenue
12(j) The policy or certificateend delete
begin delete have long-term care
14benefit or service-related features, such as the use ofend delete
15 preexisting condition
begin deletelimitations, or the end deleterequirement that begin delete benefitsend delete be conditioned
17on a prior hospitalization or institutionalization.
A life insurance contract
begin deleteor supplemental contract end delete
36submitted for the
37approval of the commissioner
begin delete pursuant toend delete Section 10292 shall be submitted with the
39 following additional
begin delete information if the contract includes an
40accelerated death benefit:end delete
P16 1(a) The term “accelerated death benefit” shall be included in
2the descriptive title.
3(b) A statement of the
begin delete types ofend delete policy forms with which
4this benefit will be offered, any underwriting
5restrictions involving face amount or age, and whether the
6 benefit is intended for use with new issues or
7in force business.
consistent with the filing requirements in
9subdivision (b) of Section 10292.
10(d) A written disclosure, including, but not necessarily limited
11to, a brief description of the accelerated death benefit and
12definitions of the conditions or occurrences triggering payment of
13the benefits, shall be given to the applicant. The description shall
14include an explanation of any effect of the payment of a benefit
15on the policy’s cash value, accumulation account, death benefit,
16premium, policy loans, and policy liens.
17(1) The written disclosure shall also include a statement that
18accelerated death benefits are not intended to replace long-term
19care benefits, and that the receipt of an accelerated death benefit
20may affect eligibility for Medicaid or other governmental benefits
21or entitlements and may have tax consequences.
22(2) The required notice shall be provided in the following form:
24“IMPORTANT NOTICE TO APPLICANT/BUYER
25REGARDING ACCELERATED DEATH BENEFITS
26The benefits provided by this (provision/supplemental contract)
27are not intended to provide, and will never provide, long-term care
28insurance, nursing home insurance, or home care insurance. If an
29applicant/buyer wants that insurance, the applicant/buyer should
30consult with an insurance agent licensed to sell that insurance,
31inquire with the insurance company offering the accelerated death
32benefits, or visit the California Department of Insurance Internet
33Web site (www.insurance.ca.gov) that provides information
34regarding long-term care insurance.
35Receipt of accelerated death benefits may be taxable. Prior to
36electing to buy the accelerated death benefit, policyholders or
37certificate holders should seek assistance from a qualified tax
39Receipt of accelerated death benefits may affect eligibility for
40public assistance programs, such as Medi-Cal or Medicaid. Prior
P17 1to electing to buy the accelerated death benefit, the applicant/buyer
2should consult with the appropriate social services agency
3concerning how receipt of accelerated death benefits may affect
6(3) In the case of agent-solicited life insurance, the agent shall
7provide the disclosure form to the applicant prior to, or
8concurrently with, the application. Acknowledgment of the
9disclosure shall be signed by the applicant and the writing agent.
10(4) In the case of a solicitation by direct response methods, the
11insurer shall provide the disclosure form to the applicant at the
12time the policy is delivered, with a notice that a full premium
13refund shall be provided to the insured if the policy is returned to
14the company within the free look period, pursuant to Section
16(5) In the case of group insurance policies, the disclosure form
17shall be contained as part of the certificate of coverage or any
18related document furnished by the insurer for the certificate holder.
19(e) If there is a premium or cost of insurance charge, the insurer
20shall give the applicant a generic illustration numerically
21demonstrating any effect of the payment of a benefit on the policy’s
22cash value, accumulation account, death benefit, premium, policy
23loans, and policy liens.
24(1) In the case of agent-solicited life insurance, the agent shall
25provide the illustration to the applicant prior to, or concurrently
26with, the application.
27(2) In the case of a solicitation by direct response methods, the
28insurer shall provide the illustration to the applicant at the time
29the policy is delivered.
30(3) In the case of group life insurance policies, the disclosure
31form shall be contained as part of the certificate of coverage or
32any related document furnished by the insurer for the certificate
34(f) An insurer with financing options other than through present
35value or a lien approach shall disclose to the policyholder any
36premium or cost of insurance charge for the accelerated death
37benefit. If the certificate is required to pay any additional premium
38or cost of insurance charge, that charge shall be shown on the
P18 1(g) The insurer shall disclose to the policyholder any
2 administrative expense charge.
3(h) An insurer shall file with the commissioner an actuarial
4memorandum prepared, dated, and signed by a member of the
5American Academy of Actuaries that includes all of the following
7(1) A description of the accelerated death benefit, including the
8effects of payment of the accelerated death benefit on all policy
9benefits, premium payments, cost of insurance rates, and values,
10including any outstanding loan, if applicable, for all types of forms
11with which the accelerated death benefit will be used.
12(2) A description of, and justification for, expense charges
13associated with the accelerated death benefit and the maximum
15(3) A description of the interest rate or interest rate methodology
16used in any present value calculation or in accruing interest on the
17amount of the accelerated death benefit, which shall not exceed
18the greater of the current yield on 90-day treasury bills, or a
19variable rate determined in accordance with the National
20Association of Insurance Commissioners (NAIC) Model Policy
21Loan Interest Rate Bill No. 590.
22(4) A description of the mortality basis and methodology,
23including the period of time applicable to any mortality discount,
24used in any present value calculation of the accelerated death
26(5) A description of the mortality and morbidity basis and
27methodology used in the determination of any separate premium
28or costs of insurance for the accelerated death benefit.
29(6) The formula used to determine the accelerated death benefit,
30including any limitations on the amount of the benefit, and the
31formula used to determine the postacceleration premium.
32(7) A sample calculation of the accelerated death benefit. If the
33policy contains a loan provision, the example shall assume that
34there is an outstanding loan on the date of acceleration. All policy
35benefits, premium payments, cost of insurance charges and values,
36including the outstanding loan, if applicable, immediately before
37and immediately after acceleration shall be shown in the example.
38(8) If an accelerated death benefit may be paid in installments,
39the basis used in the calculation of the minimum periodic payment
40for the payment period and a sample calculation of a minimum
P19 1periodic payment, and the basis used, and a sample calculation of
2the lump sum payable if the insured dies before all periodic
3payments for the payment period are made.
4(9) For any accelerated death benefit of the type other than a
5terminal illness, a certification that the value and premium of the
6accelerated death benefit is 10 percent or less of the total value of
7the benefits over the life of the policy. These values shall be
8measured as of the date of issue.
begin deleteAll applications end deletefor accelerated death begin delete benefit shall contain clear,
11provisions or supplemental contractsend delete
12unambiguous, short, and simple questions designed to ascertain
13the health condition of the applicant. Each question shall contain
14only one health status inquiry and shall require only a “yes” or
15“no” answer, except that the application may include a request for
16the name of any prescribed medication and the name of the
17prescribing physician. If the application requests the name of any
18prescribed medication or the prescribing physician, then any
19mistake or omission shall not be used as a basis for the denial of
20a claim or the rescission of
begin delete aend delete policy or certificate.
22(b) The following warning shall be printed conspicuously and
23in close conjunction with the applicant’s signature block:
25“Caution: If your answers on this application are misstated or
26untrue, the insurer may have the right to deny benefits or rescind
29(c) If an insurer does not complete medical underwriting and resolve all reasonable questions arising from
32information submitted on or with an application before issuing the
begin delete policy or certificate,end deletethen the insurer
34may only rescind the
35 policy or certificate or deny an otherwise valid claim upon clear
36and convincing evidence of fraud or material misrepresentation
37of the risk by the applicant. The evidence shall do all of the
39(1) Pertain to the condition for which benefits are sought.
P23 1(2) Involve a chronic condition or involve dates of treatment
2before the date of application.
3(3) Be material to the acceptance for coverage.
6 The contestability period for
begin delete an individualend delete
7 policy or certificate
8 shall comply with
begin delete subparagraph (C) ofend delete
paragraph begin delete(2) end deleteof
begin delete (b)end delete of Section 10271.
11 A copy of the completed application shall be delivered to
12the insured at the time of delivery of the policy or
(a) When a policyholder or certificate holder requests
16an acceleration of death benefits, the insurer shall send a statement
17to the policyholder or certificate holder and irrevocable beneficiary
18showing any effect that the payment of the accelerated death benefit
19would have on the policy’s cash value, accumulation account,
20death benefit, premium, policy loans, and policy liens. The
21statement shall disclose that receipt of accelerated death benefit
22payments may adversely affect the recipient’s eligibility for
23Medicaid or other government benefits or entitlements. In addition,
24receipt of an accelerated death benefit payment may be taxable
25and assistance should be sought from a personal tax adviser. When
26a previous disclosure statement becomes invalid as a result of an
27acceleration of the death benefit, the insurer shall send a revised
28disclosure statement to the policyholder or certificate holder and
begin deleteThe accelerated death benefit provision shall be effective The accelerated death benefit
31for terminal illness on the effective date of the policy or
32supplemental contract. end delete
begin delete provisionend delete
33 shall be effective for other qualifying events not more than 30 days
34following the effective date of the policy
begin delete or supplemental contract.end delete
36(c) The insurer may offer a waiver of premium for the
37accelerated death benefit provision in the absence of a regular
38waiver of premium provision being in effect. At the time the benefit
39is claimed, the insurer shall explain any continuing premium
40requirement to keep the policy in force.
P24 1(d) An insurer shall not unfairly discriminate among insureds
begin delete differingend delete qualifying events covered under the policy
3or among insureds with similar qualifying events covered under
4the policy. An insurer shall not apply further conditions on the
5payment of the accelerated death benefits other than those
6 conditions specified in the
begin delete policy or supplemental contract.end delete
8(e) The insurer shall provide the policyholder or certificate
9holder with a report, at least monthly, of any
10 benefits paid out during the prior month, an explanation of any
11changes to the policy or certificate, death benefits, and cash values
12on account of the benefits being paid out, and the amount of the
13remaining benefits that can be accelerated at the end of the prior
begin delete Aend delete
calendar month or policy or
begin delete may be utilizedend delete.
16(f) The policy or certificate may provide that any option
17otherwise available to the insured to accelerate less than all of the
18remaining death benefit on account of a terminal illness diagnosis
19shall be suspended while the death benefit is being so accelerated
20in accordance with the requirements of this article.
21(g) The conversion benefit available to group certificate holders
22on termination of employment pursuant to paragraph (2) of
23subdivision (a) of Section 10209 shall include a benefit comparable
24to the accelerated death benefit. This requirement may be satisfied
25by a separate policy or certificate. This requirement, subject to the
26approval of the commissioner, may be satisfied by arrangement
27with another insurer to provide the required coverage.
28(h) When payment of an accelerated death benefit results in a
29pro rata reduction in cash value, the payment may be applied
30toward repaying a portion of loan equal to a pro rata portion
31of any outstanding policy loans if disclosure of the effect of
32acceleration upon any remaining death benefit, cash value or
33accumulation account, policy loan, and premium payments,
34including a statement of the possibility of termination of any
35remaining death benefit, is provided to the policyholder or
36certificate holder. The policyholder or certificate holder shall
37provide written consent authorizing any other arrangement for the
38repayment of outstanding policy loans.
(a) The insurer may require a premium charge or
3cost of insurance charge for the accelerated death benefit. This
4charge shall be based on sound actuarial principles. In the case of
5group insurance, the additional cost may also be reflected in the
7(b) (1) The insurer may pay a present value of the face amount.
8The calculation shall be based on any applicable actuarial discount
9appropriate to the policy design. The interest rate or interest rate
10methodology used in the calculation shall be based on sound
11 actuarial principles and disclosed in the contract or actuarial
12memorandum. The maximum interest
13rate used shall be no greater than the greater of one of the
15(A) The current yield on 90-day treasury bills.
16(B) The current maximum statutory adjustable policy loan
18(2) The interest rate accrued on the portion of the lien that is
19equal in amount to the cash value of the
begin delete contract at the time of theend delete
21acceleration shall be not more than the policy loan interest rate
22stated in the contract.
23(c) (1) Except as provided in paragraph (2), when an accelerated
24death benefit is payable, there shall not be more than a pro rata
25reduction in the cash value based on the percentage of death
26benefits accelerated to produce the accelerated death benefit
28(2) Alternatively, the payment of accelerated death benefits,
29any administrative expense charges, any future premiums, and any
30accrued interest can be considered a lien against the death benefit
31of the policy
begin delete or supplemental contractend delete and begin delete theend delete access
32to the cash value may be restricted to
33any excess of the cash value over the sum of any other outstanding
34loans and the lien. Future access to additional policy loans may
35also be limited to any excess of the cash value over the sum of the
36lien and any other outstanding policy loans.
37(d) When payment of an accelerated death benefit results in a
38pro rata reduction in the cash value,
39the payment shall not be applied toward repaying an amount greater
40than a pro rata portion of any outstanding policy loans.
(a) If an accelerated death benefit is incorporated
3into the terms of the policy or certificate, an applicant for a policy
4or a certificate shall have the right to return the policy or certificate by first-class United States mail within
630 days of its delivery and to have the premium refunded if, after
7examination of the policy or certificate, the applicant is not satisfied
8for any reason. If the benefit is purchased as
begin delete a at the same time
9supplemental contractend delete
10as the base policy, then the
begin deletesupplemental contract end delete
11may be returned within 30 days. The
12underlying life insurance policy shall be otherwise subject to this
14(b) The return of a policy or certificate shall void the policy or certificate from the
18beginning and the parties shall be in the same position as if no
begin delete or contractend delete had been
20issued. All premiums paid and any policy fee paid for the
begin delete policyend delete
21 shall be fully refunded directly to the
22applicant by the insurer within 30 days after the policy or certificate is returned.
begin delete orend delete certificates
25this section applies shall have a notice prominently printed
begin delete on the , or attached thereto, stating
26first page of the policy or certificateend delete
27in substance the conditions described in subdivisions (a) and (b).
begin delete(1)end delete begin delete end deleteApplication forms shall include a question designed to elicit information as
31to whether the proposed insurance policy is intended to replace
32any long-term care insurance presently in force. A supplementary
33application or other form to be signed by the applicant containing
34that question may be used.
35(2) An insurer that determines that the policy is intended to
36replace a similar life policy without a benefit subject to this section
37shall follow the procedures in Article 8 (commencing with Section
3810509) of Chapter 5.
39(b) An insurer, broker, agent, or other person shall not
40cause a policyholder to replace a long-term care insurance policy
P27 1unnecessarily. This section shall not be construed to allow an
2insurer, broker, agent, or other person to cause a policyholder to
3replace a long-term care insurance policy or life insurance policy
4subject to this section that will result in a decrease in benefits and
5an increase in premium.
6(1) For the purposes of this section, “benefits” includes any
7term of a life insurance policy, including the availability of
8obtaining the benefit in a lump sum, the potential for a remaining
9death benefit, or any other favorable characteristic not otherwise
10available in a long-term care policy.
11(2) It shall be presumed that any third or greater policy sold to
12a policyholder in any 12-month period is unnecessary within the
13meaning of this section. This section shall not apply to those
14instances in which a policy is replaced solely for the purpose of
15consolidating policies with a single insurer.
16(c) Upon determining that a sale
begin delete doesend delete involve replacement
17of a life insurance policy subject to this section or of
18a long-term care policy, an insurer,
begin delete other than an insurer or its agent shall furnish
19using direct response solicitation methods,end delete
20the applicant, prior to issuance or delivery of a policy
begin delete orend delete certificate,
21 a notice regarding replacement of life
22insurance or long-term
23care insurance coverage with a life insurance policy
begin delete withend delete an accelerated death begin delete benefit, health . One copy
25insurance, or long-term care insurance coverageend delete
26of this notice shall be retained by the applicant and an additional
27copy signed by the applicant shall be retained by the insurer. The
28required notice shall be provided in the following form:
begin delete APPLICANT REGARDING REPLACEMENT
LONG-TERM CARE INSURANCE
31OF LIFE INSURANCE ORend delete
35According to (your application) (information you have
36furnished), you intend to lapse or otherwise terminate existing life
37insurance or long-term care insurance and replace it with a life
38insurance policy with an accelerated death benefit to be issued by
39(company name) Insurance Company. Your new coverage provides
begin delete thirty (30)end delete days within which you
P28 1may decide, without cost, whether you desire to keep the coverage.
2 For your own information
5and protection, you should be aware of, and seriously consider,
6certain factors that may affect the insurance protection available
7to you under the new coverage.
begin delete Accelerated Death Benefitend delete is
9NOT Nursing Home, Home Care, or Long-Term Care Insurance,
10and it is not intended or designed to eliminate your need for that
11coverage. There are no restrictions or limitations on the use of the
begin delete Accelerated Death Benefitend delete proceeds.
13If you want
begin delete that kind ofend delete insurance, you should
14consult with an insurance agent licensed to sell that insurance,
15inquire with the insurance company offering the accelerated death
16benefits, or visit the California Department of Insurance Internet
17Web site (www.insurance.ca.gov) that provides information
18regarding long-term care insurance.
22 Receiptend delete
23 of accelerated death benefits may be taxable. Prior
24to electing to buy the accelerated death benefit,
begin delete policy ownersend delete
25 or certificate holders should seek assistance from a
26qualified tax adviser.
27 Receiptend delete
of accelerated death benefits may affect eligibility
29for public assistance programs, such as Medi-Cal or Medicaid.
30Prior to electing to buy the accelerated death benefit, the
31applicant/buyer should consult with the appropriate social services
32agency concerning how receipt of accelerated death benefits may
33affect that eligibility.
34(1) Youend delete
35 may wish to secure the advice of your present insurer or its
36agent regarding the proposed replacement of your present coverage.
37This is not only your right, but it is also in your best interest to
38make sure you understand all the relevant factors involved in
39replacing your present coverage.
40(2) If,end delete
P29 1 after due consideration, you still wish to terminate your
2present coverage and replace it with new coverage, be certain to
3truthfully and completely answer all questions on the application
4concerning your medical health history. Failure to include all
5material medical information on an application may provide a
6basis for the company to deny any future claims and to refund your
7premium as though your coverage had never been in force. After
8the application has been completed and before you sign it, reread
9it carefully to be certain that all the information has been properly
11The above “Notice to Applicant” was delivered to me on:
15(d) For group coverage not subject to the 30-day return provision
16of Section 10295.6, the notice shall be modified to reflect the
17appropriate time period in which the policy may be returned and
20 The replacement notice shall include the following statement
21except when the replacement coverage is group insurance:
23 COMPARISONend delete
24 TO YOUR CURRENT COVERAGE: I have
25reviewed your current coverage
begin delete for the purposes of estate planning . To the
26for the need for terminal illness/chronic illness coverageend delete
27best of my knowledge, the replacement of insurance involved in
28this transaction materially improves your position for the following
30____ Additional or different benefits
31(please specify) ______.
32____ No change in benefits, but lower premiums.
33____ Fewer benefits and lower premiums.
34____Life insurance feature not available in long-term care
35insurance (please specify)
36____ Other (please specify) ______.
37(Signature of Agent and Name of Insurer)
38(Signature of Applicant)
P30 1(f) Insurers using direct response solicitation methods shall
2deliver a notice regarding replacement of life or long-term care
3coverage to the applicant upon issuance of the policy or certificate.
4The required notice shall be provided in the following form:
6“NOTICE TO APPLICANT REGARDING REPLACEMENT
7OF LIFE INSURANCE OR LONG-TERM CARE INSURANCE
8According to (your application) (information you have
9furnished), you intend to lapse or otherwise terminate existing life
10insurance or long-term care insurance and replace it with a life
11insurance policy with an accelerated death benefit to be issued by
12(company name) Insurance Company. Your new coverage provides
13thirty (30) days within which you may decide, without cost,
14whether you desire to keep the coverage. For your own information
15and protection, you should be aware of and seriously consider
16certain factors that may affect the insurance protection available
17to you under the new coverage.
18This Accelerated Death Benefit is NOT Nursing Home, Home
19Care, or Long-Term Care Insurance, and it is not intended or
20designed to eliminate your need for that coverage. There are no
21restrictions or limitations on the use of the Accelerated Death
23If you want that kind of insurance, you should consult with an
24insurance agent licensed to sell that insurance, inquire with the
25insurance company offering the accelerated death benefits, or visit
26the California Department of Insurance Internet Web site
27(www.insurance.ca.gov) that provides information regarding
28long-term care insurance.
29Receipt of accelerated death benefits may be taxable. Prior to
30electing to buy the accelerated death benefit, policy owners or
31certificate holders should seek assistance from a qualified tax
33Receipt of accelerated death benefits may affect eligibility for
34public assistance programs, such as Medi-Cal or Medicaid. Prior
35to electing to buy the accelerated death benefit, the applicant/buyer
36should consult with the appropriate social services agency
37concerning how receipt of accelerated death benefits may affect
39(1) You may wish to secure the advice of your present insurer
40or its agent regarding the proposed replacement of your present
P31 1coverage. This is not only your right, but it is also in your best
2interest to make sure you understand all the relevant factors
3involved in replacing your present coverage.
4(2) (To be included only if the application is attached to the
5policy or certificate.) If, after due consideration, you still wish to
6terminate your present coverage and replace it with new coverage,
7read the copy of the application attached to your new coverage
8and be sure that all questions are answered fully and correctly.
9Omissions or misstatements in the application may cause an
10otherwise valid claim to be denied. Carefully check the application
11and write to (company name and address) within thirty (30) days
12if any information is not correct and complete, or if any past
13medical history has been left out of the application.
16(g) For group coverage not subject to the 30-day return provision
17of Section 10295.6, the notice shall be modified to reflect the
18appropriate time period in which the policy may be returned and
20(h) If a group policy is replaced by another group policy issued
21to the same policyholder, the succeeding insurer shall offer
22coverage consistent with subdivision (g) of Section 10295.4.
24 In recommending the purchase or replacement of any policy
25or certificate issued under this section, an agent shall make
26reasonable efforts to determine the appropriateness of a
27recommended purchase or replacement.
29 The replacing policy or certificate shall not contain a
30provision establishing a new waiting period in the event existing
31coverage is converted to, or replaced by, a new or other form within
32the same insurer, except with respect to an increase in benefits
33voluntarily selected by the insured individual or group
(a) An accelerated death benefit policy shall not be
6advertised or marketed as long-term care insurance, nursing home
7insurance, or home care insurance. Any advertisement, description,
8comparison, marketing material, or illustration shall state in bold
9that: “This product is a life insurance policy that accelerates the
10death benefit for qualified chronic illness or other qualified events
11and is not insurance providing long-term care insurance subject
12to the minimum requirements of California Law, does not qualify
13for the California Partnership for Long-Term Care program, and
14is not a Medicare supplement (policy or certificate).” An insurer
15shall include in any advertisement or marketing materials for these
16insurance policies all of the following:
17(1) A statement that the policy or certificate is intended to be a
18tax-qualified insurance contract under Section 7702(b) of the
19Internal Revenue Code (26 U.S.C. 7702(b)), if applicable.
20(2) A description of the benefits provided by the policy,
21including a description of the acceleration of the death benefit to
22pay an unrestricted cash benefit when the insured has become
23chronically ill or otherwise eligible for benefits from a qualified
25(3) A comparison between the benefits provided by these
26policies and the benefits provided by long-term care insurance.
27(b) The statement in paragraph (1) of subdivision (a) may only
28appear in an advertisement, description comparison, illustration,
29or marketing material for policies or certificates that accelerate
30death benefits pursuant to Section 10295 if the policy or certificate
31is a tax-qualified insurance contract under Section 7702(b) of the
32Internal Revenue Code (26 U.S.C. 7702(b)).
begin deleteThe end deletefollowing acts and practices in the sale
9of insurance under this article are prohibited:
10(a) Twisting. Knowingly making any misleading representation
11or incomplete or fraudulent comparison of any insurance policies
12or insurers for the purpose of inducing, or tending to induce, any
13person to lapse, forfeit, surrender, terminate, retain, pledge, assign,
14borrow on or convert any insurance policy, or to take out a policy
15of insurance with another insurer.
16(b) High pressure tactics. Employing any method of marketing
17having the effect of, or tending to, induce the purchase of insurance
18through force, fright, threat, whether explicit or implied, or undue
19pressure to purchase or recommend the purchase of insurance.
20(c) Cold lead advertising. Making use directly or indirectly of
21any method of marketing that fails to disclose in a conspicuous
22manner that a purpose of the method of marketing is solicitation
23of insurance and that contact will be made by an insurance agent
24or insurance company.
An individual accelerated death benefit
begin delete policy or shall not be issued unless it meets the requirements of
28Section 10113.72 regarding unintentional lapse.
(a) Except at the request of the policyholder or
31contract holder, all accelerated death benefit provisions or
32supplemental contracts shall be renewable for the life of the
33underlying life insurance policy.
36(b) Term life insurance policies shall also include a statement
37that the accelerated death benefit terminates with the policy.
Termination of the accelerated death benefit
40provision shall be without prejudice to any benefits payable for
P35 1any claim if the claim began while the accelerated death benefit
2provision was in force and continues without interruption after
begin delete An extension of benefits beyond the period the
4insurance was in force may be limited to the duration of the benefit
5period, if any, or to payment of the maximum benefits and may
6be subject to any policy waiting period, and all other applicable
7provisions of the insurance policy.end delete
begin delete(a)end delete begin delete end delete begin deleteExcept as described in subdivision (b), an end delete
10insurer that fails to conform to the requirements provided under
11this article shall be subject to Article 6.5 (commencing with Section
12790) of Chapter 1 of Part 2 of Division 1.
13(b) A violation of this article is not subject to
14of Section 790.036.