BILL ANALYSIS �
SB 1449
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1449 (Calderon) - As Amended: August 6, 2012
Policy Committee: InsuranceVote:12
- 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill permits life insurance policies to include premium and
surrender charge waivers triggered by specified medical
conditions. Specifically, this bill:
1)Allows a life insurance policy owner who is totally disabled
to qualify for a waiver of premium on a life insurance policy.
2)Permits life insurance contracts to include definitions of
total disability that include presumptive total disability for
the total loss of sight, hearing, speech, use of hands or
feet.
3)Requires total disability to continue for a consecutive period
of time specified in the contract to qualify for a premium
waiver.
4)Permits the life insurance policy to exclude total disability
injuries that were self-inflicted or resulted from reckless or
illegal conduct.
5)Establishes minimum standards for the duration of a premium
waiver for total disability.
6)Permits life insurance and annuity contracts to include
provisions for waiving surrender charges if the owner,
insured, annuitant, or beneficiary:
a) Develops a terminal condition.
b) Receives home or community based services on
prescription of a physician.
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c) Becomes totally disabled.
d) Develops a chronic illness that results in a
permanent inability to perform activities of daily
living.
e) Becomes unemployed.
FISCAL EFFECT
Increased workload for CDI associated with increased reviews and
refilings would likely cost approximately $135,000 in 2012-13,
growing to $195,000 in 2013-14. On-going costs would likely be
in the range of $140,000 per year. (Insurance Fund)
COMMENTS
1)Purpose . The intent of this bill is to streamline the process
for approval of special features for life insurance and
annuity products that may provide consumers with resources
during difficult times, including a waiver of premiums during
periods of disability and a waiver of the surrender charge if
the insured suffers specified serious medical conditions,
disability, or unemployment. These features are commonly
available in other states, but are not available in California
under existing law.
2)Surrender Charge Waiver . Permanent life insurance, such as a
whole life policy, accrues a cash value (which is different
than the amount paid to a beneficiary if the insured dies)
over time and provides life insurance protection as long as
the premiums are paid. The policy owner can surrender a life
insurance policy for cash value, but generally must pay a
surrender charge for doing so if the surrender occurs within a
time period established in the policy (commonly 7-10 years
from the issuance of the policy or annuity). Annuity
contracts also have cash value and impose surrender charges on
a similar basis.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081
SB 1449
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