BILL NUMBER: AB 565 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 16, 2016
PASSED THE ASSEMBLY AUGUST 23, 2016
AMENDED IN SENATE JUNE 29, 2016
AMENDED IN SENATE MARCH 10, 2016
AMENDED IN ASSEMBLY APRIL 28, 2015
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Cooley
FEBRUARY 24, 2015
An act to amend Sections 10203.4 and 10271.1 of the Insurance
Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 565, Cooley. Group life insurance: required provisions.
Existing law provides for the regulation of specified insurance
products, including group life insurance, by the Insurance
Commissioner. Existing law provides that insurance under a group life
insurance policy may be extended to insure the dependents of each
insured employee under the group policy, as specified. Existing law
defines a dependent for these purposes as including the employee's
spouse and all children from birth until 26 years of age, or a child
26 years of age or older who is both incapable of self-sustaining
employment by reason of intellectual disability or physical handicap
and chiefly dependent upon the employee for support and maintenance,
as specified.
This bill would clarify that for dependent children over the age
of majority the group policyholder would be authorized to elect
coverage at age variations up to the limiting age.
Existing law defines a waiver of premium benefit or a waiver of
monthly deduction benefit under a life insurance contract as a
supplemental benefit that operates to safeguard a life insurance
contract against lapse when the insured becomes totally disabled, as
defined by the supplemental benefit, and continues until the end of
the insured's disability or the period specified by the supplemental
benefit, consistent with specified restrictions. Existing law
requires, if the insured's total disability begins before the insured
attains 60 years of age, the insurer to waive all premiums or
monthly deductions due for the period that the insured continues to
be totally disabled. Existing law requires, if the insured's total
disability begins when the insured is 60 years of age or older, the
insurer to waive all premiums or monthly deductions due for the
period that the insured continues to be totally disabled up to 65
years of age.
This bill would require an insurer, for an insured who becomes
totally disabled before attaining 60 years of age and is covered by a
group life insurance policy that includes a supplemental benefit, to
waive all premiums or monthly deductions due for the period of total
disability up to the time the insured attains 65 years of age. The
bill would also permit an insurer to collect premiums or monthly
deductions from an insured who becomes totally disabled on or after
60 years of age and is covered by a group life insurance policy that
includes a supplemental benefit. The bill would require an insurer
offering a renewal for a group life insurance policy issued prior to
January 1, 2017, that contains a supplemental benefit to offer the
employer a continuation of the in-force supplemental benefit, and
would authorize the insurer to concurrently offer the group
policyholder the option to change the supplemental benefit to either
waive or collect premiums or monthly deductions as described above.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10203.4 of the Insurance Code is amended to
read:
10203.4. (a) Insurance under a group life insurance policy issued
pursuant to Sections 10202, 10202.8, 10203, 10203.1, and 10203.7 may
be extended to insure the dependents, or any class or classes
thereof, of each insured employee who so elects, in amounts in
accordance with some plan that precludes individual selection and
that shall not be in excess of 100 percent of the insurance on the
life of the insured employee. For dependent children over the age of
majority, the group policyholder may elect coverage at age variations
up to the limiting age.
(b) "Dependent" includes the member's spouse or a minor child, as
well as a child older than the age of majority up to a maximum of 26
years of age, or any child over the age of majority who is both
incapable of self-sustaining employment by reason of an intellectual
disability or physical handicap and chiefly dependent upon the
employee for support and maintenance if proof of the incapacity and
dependency is furnished to the insurer by the employee within 31 days
of the child's attainment of the limiting age and subsequently as
may be required by the insurer, but not more frequently than annually
after the two-year period following the child's attainment of the
limiting age.
(c) The premiums for the insurance on the dependents may be paid
by the employer, the employee, or the employer and the employee
jointly.
SEC. 2. Section 10271.1 of the Insurance Code is amended to read:
10271.1. (a) (1) Supplemental benefits that operate to safeguard
life insurance contracts against lapse are defined as a waiver of
premium benefit or a waiver of monthly deduction benefit, as
applicable, in which the insurer waives the premium or monthly
deduction for a life insurance contract when the insured becomes
totally disabled, as defined by the supplemental benefit, and where
the waiver continues until the end of the insured's disability, or
for the period specified by the supplemental benefit, consistent with
paragraph (5).
(2) For purposes of this subdivision, total disability shall not
be less favorable to the insured than the following:
(A) During the first 24 months of total disability, the insured is
unable to perform with reasonable continuity the substantial and
material duties of his or her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the insured,
due to sickness or bodily injury, is unable to engage with reasonable
continuity in any other job in which he or she could reasonably be
expected to perform satisfactorily in light of his or her age,
education, training, experience, station in life, or physical and
mental capacity.
(3) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(4) The insurer may require total disability to continue for an
uninterrupted period of time specified by the supplemental benefit,
or the insurer may allow separate periods of disability to be
combined.
(5) The waiver of premium or monthly deduction benefit shall
continue for the period specified by the supplemental benefit, but
shall not be less favorable to the insured than the following:
(A) If the insured's total disability begins before the insured
attains 60 years of age, the insurer shall waive all premiums or
monthly deductions due for the period that the insured continues to
be totally disabled, except as follows:
(i) For group life insurance policies, 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 total disability up to 65 years of age. Nothing in this
subdivision shall preclude the insurer from extending a supplemental
benefit for longer periods.
(ii) When a renewal is offered for a group life insurance policy
that was issued prior to January 1, 2017, and contains a supplemental
benefit described in this subparagraph, the insurer shall offer to
renew the policy with a continuation of the in-force supplemental
benefit, and may concurrently offer the group policyholder the option
to change the supplemental benefit as described in clause (i).
(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, except as follows:
(i) For group life insurance policies, if the insured's total
disability begins on or after the date the insured attains 60 years
of age, the insurer is not required to waive premiums or monthly
deductions. Nothing in this subdivision shall preclude the insurer
from extending a supplemental benefit for longer periods.
(ii) When a renewal is offered for a group life insurance policy
that was issued prior to January 1, 2017, and contains a supplemental
benefit described in this subparagraph, the insurer shall offer to
renew the policy with a continuation of the in-force supplemental
benefit, and may concurrently offer the group policyholder the option
to change the supplemental benefit as described in clause (i).
(6) In addition to the permissible exclusions listed in
subdivision (g) of Section 10271, the insurer may exclude a total
disability occurring after the policy anniversary or supplemental
contract anniversary, as applicable and as defined by the
supplemental benefit, on which the insured attains a specified age of
no less than 65 years.
(b) "Special surrender benefit" is defined as a "waiver of
surrender charge benefit" wherein the insurer waives the surrender
charge usually charged for a withdrawal of funds from the cash value
of a life insurance contract or the account value of an annuity
contract if the owner, insured, or annuitant, as applicable, meets
any of the following criteria:
(1) Develops any medical condition where the owner's, insured's,
or annuitant's life expectancy is expected to be less than or equal
to a limited period of time that shall not be restricted to a period
of less than 12 months or greater than 24 months.
(2) Is receiving, as prescribed by a physician, registered nurse,
or licensed social worker, home care or community-based services, as
defined in subdivision (a) of Section 10232.9, or is confined in a
skilled nursing facility, convalescent nursing home, or extended care
facility, which shall not be defined more restrictively than as in
the Medicare program, or is confined in a residential care facility
or residential care facility for the elderly, as defined in the
Health and Safety Code. Out-of-state providers of services shall be
defined as comparable in licensure and staffing requirements to
California providers.
(3) Has any medical condition that would, in the absence of
treatment, result in death within a limited period of time, as
defined by the supplemental benefit, but that shall not be restricted
to a period of less than six months.
(4) Is totally disabled, as follows:
(A) During the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, is unable to perform with
reasonable continuity the substantial and material duties of his or
her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, due to sickness or bodily
injury, is unable to engage with reasonable continuity in any other
job in which he or she could reasonably be expected to perform
satisfactorily in light of his or her age, education, training,
experience, station in life, or physical and mental capacity.
(C) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(D) The insurer may require the total disability to continue for
an uninterrupted period of time specified by the supplemental
benefit, or the insurer may allow separate periods of disability to
be combined.
(5) Has a chronic illness as defined pursuant to either
subparagraph (A) or (B):
(A) Either of the following:
(i) Impairment in performing two out of seven activities of daily
living, as set forth in subdivisions (a) and (g) of Section 10232.8,
meaning the insured needs human assistance, or needs continual
substantial supervision.
(ii) The insured has an impairment of cognitive ability, meaning a
deterioration or loss of intellectual capacity due to mental illness
or disease, including Alzheimer's disease or related illnesses, that
requires continual supervision to protect oneself or others.
(B) Either of the following:
(i) Impairment in performing two out of six activities of daily
living as described in subdivisions (b), (d), (e), and (f) of Section
10232.8 due to a loss of functional capacity to perform the
activity.
(ii) Impairment of cognitive ability, meaning the insured needs
substantial supervision due to severe cognitive impairment, as
described in subdivisions (b), (d), and (e) of Section 10232.8.
(6) Has become involuntarily or voluntarily unemployed.
(c) The term "supplemental benefit" means a rider to or provision
in a life insurance policy, certificate, or annuity contract that
provides a benefit as set forth in subdivision (a) of Section 10271.