§ 3762. Nonforfeiture benefits
(a) In the case of policies issued on or after the effective date of this subchapter,
as defined in section 3773 of this subchapter, a policy of life insurance, except
as stated in section 3772 of this subchapter, shall not be delivered or issued for
delivery in this State unless it contains in substance the following provisions, or
corresponding provisions that, in the opinion of the Commissioner, are at least as
favorable to the defaulting or surrendering policyholder as are the minimum requirements
specified in this section and are essentially in compliance with section 3771 of this
subchapter.
(1) In the event of default in any premium payment, the company shall grant, upon proper
request not later than 60 days after the due date of the premium in default, a paid-up
nonforfeiture benefit on a plan stipulated in the policy, effective as of the due
date, of such amount as may be specified in this section. In lieu of the stipulated
paid-up nonforfeiture benefit, the company may substitute, upon proper request not
later than 60 days after the due date of the premium in default, an actuarially equivalent
alternative paid-up nonforfeiture benefit that provides a greater amount or earlier
payment of endowment benefits.
(2) Upon surrender of the policy within 60 days after the due date of any premium payment
in default after premiums have been paid for at least three full years in the case
of ordinary insurance or five full years in the case of industrial insurance, the
company shall pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender
value of an amount as may be specified in this section.
(3) A specified paid-up nonforfeiture benefit shall become effective as specified in the
policy unless the person entitled to make the election elects another available option
not later than 60 days after the due date of the premium in default.
(4) If the policy becomes paid-up by completion of all premium payments or if it is continued
under any paid-up nonforfeiture benefit that became effective on or after the third
policy anniversary in the case of ordinary insurance or the fifth policy anniversary
in the case of industrial insurance, the company shall pay upon surrender of the policy
within 30 days after any policy anniversary, a cash surrender value of an amount as
may be specified in this section.
(5) If a policy causes, on a basis guaranteed in the policy, unscheduled changes in benefits
or premiums, or provides an option for changes in benefits or premiums, other than
a change to a new policy, the company shall provide the policyholder a statement of
the mortality table, interest rate, and method used in calculating cash surrender
values and the paid-up nonforfeiture benefits available under the policy. In the case
of all other policies, a company shall provide to its policyholders a statement of
the mortality table and interest rate used in calculating the cash surrender values
and the paid-up nonforfeiture benefits available under the policy, together with a
table showing the cash surrender value, if any, and paid-up nonforfeiture benefit,
if any, available under the policy on each policy anniversary either during the first
20 policy years or during the term of the policy, whichever is shorter, such values
and benefits to be calculated upon the assumption that there are no dividends or paid-up
additions credited to the policy and that there is no indebtedness to the company
on the policy.
(6) A company shall provide statement that the cash surrender values and the paid-up nonforfeiture
benefits available under the policy are not less than the minimum values and benefits
required by or pursuant to the insurance law of the state in which the policy is delivered;
an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture
benefits are altered by the existence of any paid-up additions credited to the policy
or any indebtedness to the company on the policy; if a detailed statement of the method
of computation of the values and benefits shown in the policy is not stated therein,
a statement that such method of computation has been filed with the insurance supervisory
official of the state in which the policy is delivered; and a statement of the method
to be used in calculating the cash surrender value and a paid-up nonforfeiture benefit
available under the policy on any policy anniversary beyond the last anniversary for
which values and benefits are consecutively shown in the policy.
(b) Any of the provisions in subsection (a) of this section, or portions thereof, not
applicable by reason of the plan of insurance may be omitted from the policy, to the
extent inapplicable.
(c) The company shall reserve the right to defer the payment of any cash surrender value
for a period of six months after demand therefor with surrender of the policy.
(d) No individual policy of life insurance covering an individual 64 years of age or older
that has been in force for at least one year shall be canceled for nonpayment of premium
unless, after expiration of the grace period and not less than 21 days before the
effective date of any such cancellation, the insurer has mailed a notice of impending
cancellation in coverage to the policyholder and to a specified secondary addressee
if such addressee has been designated by name and address in writing by the policyholder.
An insurer shall notify the applicant of the right to designate a secondary addressee
at the time of application for the policy on a form provided by the insurer, and annually
thereafter, and the policyholder shall have the right to designate a secondary addressee,
in writing, by name and address, at any time the policy is in force, by submitting
such written notice to the insurer. If a life insurance policy provides a grace period
longer than 51 days for nonpayment of premium, the notice of cancellation in coverage
required by this subsection shall be mailed to the policyholder and to the secondary
addressee not less than 21 days prior to the expiration of the grace period provided
in such policies. (Added 2015, No. 63, § 2, eff. June 17, 2015; amended 2017, No. 80, § 1.)