§431:10D-102 - Standard provisions required.
§431:10D-102 Standard provisions required. (a) No policy of life insurance shall be delivered or issued for delivery in this State unless it contains in substance all of the following provisions:
(1) Grace period. A grace period of thirty days shall be allowed during which the policy shall continue in full force. If a claim arises under the policy during the grace period and before an overdue premium is paid, the amount of such premium may be deducted from the policy proceeds.
(2) Entire contract. The policy, or the policy and the application therefor, shall constitute the entire contract between the parties. All statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties. The application shall not constitute a part of the entire contract unless a copy of the application is endorsed upon or attached to the policy when issued.
(3) Incontestability. The policy, exclusive of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means, shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue.
(4) Misstatement of age. If the age of the insured or of any other person whose age is considered in determining the premium has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages.
(5) Reinstatement. The policy will be reinstated at any time within three years from the date of premium default, unless the policy has been surrendered for its cash surrender value or unless the paid-up term insurance has expired, upon:
(A) Written application for reinstatement;
(B) The production of evidence of insurability satisfactory to the insurer;
(C) The payment of all premiums in arrears; and
(D) The payment or reinstatement of any other indebtedness to the insurer upon the policy, all with interest at a rate not exceeding six per cent a year compounded annually.
(6) Participation in surplus.
(A) In participating policies, that beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, accruing on the policy anniversary or other dividend date specified in the policy. Except as hereinafter provided, any dividend becoming payable shall at the option of the party entitled to elect such option be either:
(i) Payable in cash, or
(ii) Applied to any one of the other dividend options as may be provided by the policy.
(B) If any other dividend options are provided, the policy shall state which option shall be automatically effective if the party shall not have elected some other option before the expiration of the period not less than thirty days following the date on which the dividend is due and payable. The annually apportioned dividend shall be deemed to be payable in cash within the meaning of [subparagraph] (A)(i) even though the policy provides that payment of the dividend is to be deferred for a specified period, provided such period does not exceed six years from the date of apportionment, and that interest will be added to the dividend at a specified rate. If a policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under the nonforfeiture provision shall be applied in the manner set forth in the policy.
(7) Table of installments. A table showing the amounts of the guaranteed installments in instances where the policy provides that the proceeds may be payable in installments which are determinable prior to maturity of the policy.
(8) Policy loan.
(A) (i) In the case of policies issued prior to the operative date of the Standard Nonforfeiture Law (section 431:10D-104), a provision that after the policy has been in force three full years, the insurer at any time, while the policy is in force, will:
(I) Advance on proper assignment or pledge of the policy and on the sole security thereof, at a specified rate of interest, a sum equal to or, at the option of the insured, less than the reserve at the end of the current policy year on the policy and on any dividend additions thereto, computed according to a mortality table, interest rate, and method of valuation permitted by section 431:5-307, less a sum of not more than two and one-half per cent of the amount insured by the policy and of any dividend additions thereto; and
(II) Deduct from the loan value any existing indebtedness on the policy and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year.
The policy may further provide that the loan may be deferred for not exceeding six months after the application is made.
(ii) This subsection shall not be required in term insurance, nor shall it apply to temporary insurance or pure endowment insurance, issued or granted in exchange for lapsed or surrendered policies.
(B) (i) In the case of policies issued on or after the operative date of the Standard Nonforfeiture Law (section 431:10D-104), a provision that after the policy has a cash surrender value and while no premium is in default, the insurer will advance, on proper assignment or pledge of the policy and on the sole security thereof, at a rate of interest not exceeding eight per cent a year, an amount at the option of the party entitled thereto, not to exceed the loan value less any prior indebtedness on the policy. If the policy shall provide for a rate of return in excess of six per cent a year, the commissioner may require of the insurers that the holders of such policies will benefit through higher dividends or lower premiums. The policy shall also provide for a loan value at least equal to the cash surrender value of the policy without indebtedness at the end of the then current policy year, less any unpaid balance of the premium for the current policy year, and less interest on the loan to the end of the current policy year. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for six months after application is made.
(ii) The policy may also provide that if interest on any indebtedness is not paid when due, it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy including interest due or accrued, equals or exceeds the amount of the loan value thereof, then the policy shall terminate and become void.
(iii) This subsection shall not apply to term policies nor to term insurance benefits provided by rider or supplemental policy provisions.
(9) Nonforfeiture benefits and cash surrender values.
(A) (i) In the case of policies issued prior to the operative date of the Standard Nonforfeiture Law (section 431:10D-104), a provision that in event of default in premium payments, after premiums shall have been paid for three years, the insured shall be entitled to a stipulated form of insurance the net value of which shall be at least equal to the reserve at the date of default on the policy and on dividend additions thereto, if any, computed according to a mortality table, interest rate, and method of valuation permitted by section 431:5-307, less a percentage (not more than two and one-half) of the amount insured by the policy and of existing dividend additions thereto, if any, and less any existing indebtedness to the insurer on or secured by the policy; provided that:
(I) If the benefits under the policy are calculated according to a more modern table than the American Experience Table of Mortality, the value of any extended term insurance, with accompanying pure endowment, if any, may be calculated according to rates of mortality not exceeding one hundred thirty per cent of the rates according to such more modern table;
(II) The policy may be surrendered to the insurer at its home office within one month of date of default for a specified cash value at least equal to the sum which would otherwise be available for the purchase of insurance as aforesaid; and
(III) The insurer may defer payment for not more than six months after the application is made.
(ii) The policy shall also contain a provision specifying the options to which the policyholder is entitled in the event of default in a premium payment after three full annual premiums have been paid.
(iii) The policy shall also contain a table showing in figures the loan values and the options available under the policy each year upon default in premium payments, during at least the first twenty years of the policy or during the premium paying period if less than twenty years.
(iv) A provision may be inserted in the policy that in event of default in a premium payment before the options become available, the reserve on any dividend additions then in force may at the option of the insurer be paid in cash or applied as a net premium to the purchase of paid-up term insurance for any amount not in excess of the face of the original policy.
(v) This subsection shall not be required in term insurance of twenty years or less.
(B) In the case of policies issued on or after the operative date of the Standard Nonforfeiture Law (section 431:10D-104), a provision for nonforfeiture benefits and cash surrender values in accordance with the requirements of section 431:10D-104.
(b) Any of the provisions or portions of [subsection (a)](1) through (9) not applicable to single premium policies shall to that extent not be incorporated therein. This section shall not apply to:
(1) Any provision of a life insurance policy relating to disability benefits;
(2) Additional benefits in the event of death by accident or accidental means;
(3) Annuities; or
(4) Pure endowment contracts. [L 1987, c 347, pt of §2; am L 2004, c 122, §43]