Article 2.1. Accelerated Death Benefits of California Insurance Code >> Division 2. >> Part 2. >> Chapter 4. >> Article 2.1.
(a) An accelerated death benefit, as described in this
section, shall not be offered, sold, issued, or marketed as health,
accident, or long-term care insurance. An accelerated death benefit
shall not reimburse or provide specific coverage for any health,
accident, or long-term care insurance benefits.
(b) (1) For the purposes of this article, an "accelerated death
benefit" means a provision, endorsement, or rider added to a life
insurance policy that provides for the advance payment of any part of
the death proceeds, payable upon the occurrence of a qualifying
event in accordance with Section 10295.1.
(2) For the purposes of this article, "qualifying event" means
that subparagraph (A) or (B) applies.
(A) The insured has a 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.
(B) (i) The insured has a chronic illness as defined in
subparagraph (B) of paragraph (5) of subdivision (b) of Section
10271.1.
(ii) For policies intended to be federally tax qualified, the
insurer shall require that a licensed health care practitioner,
independent of the insurer, certifies that the insured meets the
definition of "chronically ill individual" as defined under the
federal Health Insurance Portability and Accountability Act (Public
Law 104-191).
(I) If a health care practitioner makes a determination, pursuant
to this clause, that an insured does not meet the definition of
"chronically ill individual," the insurer shall notify the insured
that the insured shall be entitled to a second assessment by a
licensed health care practitioner, upon request, who shall personally
examine the insured. The requirement for a second assessment shall
not apply if the initial assessment was performed by a practitioner
who otherwise meets the requirements of this clause and who
personally examined the insured.
(II) The assessments conducted pursuant to this clause shall be
performed promptly with the certification completed as quickly as
possible to ensure that an insured's benefits are not delayed. The
written certification shall be renewed every 12 months.
(III) The costs to have a licensed health care practitioner
certify that an insured meets, or continues to meet, the definition
of "chronically ill individual," shall not count against the lifetime
maximum of the policy or certificate.
(IV) In order to be considered "independent of the insurer," a
licensed health care practitioner shall not be an employee of the
insurer and shall not be compensated in any manner that is linked to
the outcome of the certification.
(V) It is the intent of the Legislature in enacting this clause
that the practitioner's assessments be unhindered by financial
considerations.
(VI) This clause shall apply only to a policy or certificate
intended to be federally tax qualified.
(3) For the purposes of this article, "applicant" means any of the
following:
(A) In the case of an individual life insurance policy with an
accelerated death benefit, the person who seeks to contract for
benefits.
(B) (i) In the case of a group life insurance policy with an
accelerated death benefit, the proposed certificate holder.
(ii) "Certificate" means any certificate issued under a group life
insurance policy that includes an accelerated death benefit.
(4) For the purposes of this article, 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.
(c) A life insurance policy that accelerates death benefits if the
insured is chronically ill and requires that the insured receives
long-term care services described in Section 10231.2, shall not be
considered an accelerated death benefit for the purposes of this
article.
(d) Nothing in this subdivision shall be construed as prohibiting
an insurer from including other riders to a life insurance policy,
such as a terminal illness rider, that are not subject to this
article.
(a) An accelerated death benefit as defined in paragraph
(1) of subdivision (b) of Section 10295 shall comply with, and shall
explain all of, the following:
(1) That the accelerated death benefit is fixed at the time the
insurer approves the request for the accelerated death benefit.
(2) That the payment of the accelerated death benefit is not
conditioned on the receipt of long-term care or medical services.
(3) That the insured shall have the option to take the accelerated
death benefit in a lump sum on the occurrence of a qualifying event,
as well as an option to receive the benefit in periodic payments is
provided for a certain period only.
(4) That the accelerated death benefit may not restrict the
insured's use of the proceeds.
(5) That the payment of the accelerated death benefit is due
immediately upon receipt of the due written proof of eligibility.
(6) That, prior to the payment of the accelerated death benefit,
the insurer is required to obtain from an assignee or irrevocable
beneficiary, if any, a signed acknowledgment of concurrence for
payout. If the insurer making the accelerated death benefit is itself
the assignee under the policy, the acknowledgment is not required.
(7) That if any death benefit remains after payment of an
accelerated death benefit, the accidental death benefit provision, if
any, in the policy shall not be affected by the payment of the
accelerated death benefit.
(b) The accelerated death benefit shall also provide for all of
the following:
(1) A maximum amount that may be accelerated.
(2) An explanation that the insured may accelerate more than once
on a qualifying event up to the maximum amount.
(3) An explanation that the insured may accelerate on more than
one of the qualifying events specified in the supplemental provision
up to the maximum amount.
(4) A statement that the policy, rider, endorsement, or
certificate pays proceeds that are or are not intended for favorable
tax treatment under Section 101(g) of the Internal Revenue Code (26
U.S.C. Sec. 101(g)), if applicable.
(c) The insurer shall advise the policyholder or certificate
holder that there may be tax consequences of accepting an amount
above the amount that would be tax qualified under the Internal
Revenue Code.
(d) The accelerated death benefit shall not contain any
preexisting condition limitation and shall not contain any
requirement that acceleration be conditioned on a prior
hospitalization or institutionalization.
(e) The accelerated death benefit shall contain an explanation of
how the insured will pay for the accelerated death benefit, whether
by paying a portion of the premium for the life insurance policy, by
paying a fee at the time of the acceleration, by paying the cost of
insurance charge, or by paying the administrative expense charge,
together with an illustration. If there is a premium or cost of
insurance charge, or a charge imposed upon the acceleration, a
generic illustration numerically demonstrating any effect of the
payment of a benefit on the policy's cash value, accumulation
account, death benefit, premium, policy loans, and policy liens shall
suffice for this purpose.
(f) (1) Every accelerated death benefit that pays proceeds
intended for favorable tax treatment under Section 101(g) of the
Internal Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as
such by prominently displaying and printing that intention on page
one of the accelerated benefit policy provision, rider, endorsement,
or certificate.
(2) Every accelerated death benefit that pays proceeds that are
not intended for favorable tax treatment under Section 101(g) of the
Internal Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as
such by prominently displaying and printing that intention on page
one of the accelerated death benefit policy provision, rider,
endorsement, or certificate.
A life insurance contract with an accelerated death
benefit or an accelerated death benefit in the form of a rider or
endorsement shall be submitted for the approval of the commissioner
in the same manner as required under Section 10292 and shall be
submitted with the following additional information:
(a) The term "accelerated death benefit" shall be included in the
descriptive title of the filing.
(b) A statement of the specific policy forms with which this
accelerated death benefit will be offered, any underwriting
restrictions involving face amount or age, and whether the
accelerated death benefit is intended for use with new issues or in
force business, or both.
(c) An insurer that requires certification that a chronic illness
is expected to last longer than 90 days shall include in its filing a
legal memorandum from outside tax counsel that the certification
would allow for preferable tax treatment under Section 101(g) of the
Internal Revenue Code (26 U.S.C. Sec. 101(g)).
(a) A written disclosure, as set forth below, shall be
included with the filing for the commissioner's approval, and shall
be given to each applicant. The same written disclosure shall be
attached to the policy or certificate delivered to the insured.
(b) The required written disclosure shall be in the following
form:
"IMPORTANT NOTICE TO APPLICANT/BUYER REGARDING ACCELERATED DEATH
BENEFITS"
"The benefits provided by this accelerated death benefit are not
intended to provide, and will never provide, long-term care
insurance, nursing home insurance, or home care insurance. If you are
interested in long-term care or nursing home or home care insurance,
you should consult with an insurance agent licensed to sell that
insurance, inquire with the insurance company offering the
accelerated death benefits, or visit the California Department of
Insurance Internet Web site (www.insurance.ca.gov) section regarding
long-term care insurance.
If you choose to accelerate a portion of your death benefit, doing
so will reduce the amount that your beneficiary will receive upon
your death.
Receipt of accelerated death benefits may be taxable. Prior to
electing to buy the accelerated death benefit, you should seek
assistance from a qualified tax adviser.
Receipt of accelerated death benefits may affect eligibility for
public assistance programs, such as Medi-Cal or Medicaid. Prior to
electing to buy the accelerated death benefit, you should consult
with the appropriate social services agency concerning how receipt of
accelerated death benefits may affect that eligibility."
(c) In the case of agent-solicited life insurance, the agent shall
provide the disclosure form to the applicant prior to, or
concurrently with, the application. Acknowledgment of the applicant's
receipt of the disclosure shall be signed by the applicant and the
writing agent.
(d) In the case of a solicitation by direct response methods, the
insurer shall provide the disclosure form to the applicant together
with the application. A notice that a full premium refund shall be
provided to the insured if the policy is returned to the company
within the free look period, pursuant to Section 10295.8.
(e) In the case of group insurance policies, the disclosure form
shall be delivered together with the application for the certificate,
or with the certificate of coverage or any related document
furnished by the insurer for the certificate holder.
An insurer shall file with the commissioner an actuarial
memorandum prepared, dated, and signed by a member of the American
Academy of Actuaries that includes all of the following information:
(a) A description of the accelerated death benefit, including the
effects of payment of the accelerated death benefit on all life
insurance policy benefits and any subsequent accelerated death
benefits, premium payments, cost of insurance rates, and values,
including any outstanding loan, if applicable, for all types of forms
with which the accelerated death benefit will be used.
(b) A description of, and justification for, expense charges
associated with the accelerated death benefit and the maximum expense
charges.
(c) A description of the interest rate or interest rate
methodology used in any present value calculation or in accruing
interest on the amount of the accelerated death benefit, which shall
not exceed the greater of the current yield on 90-day treasury bills,
or a variable rate determined in accordance with the National
Association of Insurance Commissioners (NAIC) Model Policy Loan
Interest Rate Bill No. 590.
(d) A description of the mortality basis and methodology,
including the period of time applicable to any mortality discount,
used in any present value calculation of the accelerated death
benefit.
(e) A description of the mortality and morbidity basis and
methodology used in the determination of any separate premium or
costs of insurance for the accelerated death benefit.
(f) The formula used to determine the accelerated death benefit,
including any limitations on the amount of the benefit, and the
formula used to determine the postacceleration premium for the
accelerated death benefit as well as the life insurance policy.
(g) A sample calculation of the accelerated death benefit. If the
life insurance policy contains a loan provision, the example shall
assume that there is an outstanding loan on the date of acceleration.
All policy and accelerated death benefit benefits, premium payments,
cost of insurance charges and values, including the outstanding
loan, if applicable, immediately before and immediately after
acceleration shall be shown in the example.
(h) If an accelerated death benefit will be paid in installments,
the actuarial memorandum shall explain the basis used in the
calculation of the minimum periodic payment for the payment period
and a sample calculation of a minimum periodic payment, and the basis
used, and a sample calculation of the lump sum payable if the
insured dies before all periodic payments for the payment period are
made.
(i) (1) For any accelerated death benefit subject to this article,
a certification that the value and premium of the accelerated death
benefit is 10 percent or less of the total value of the benefits over
the life of the policy. These values shall be measured as of the
date of issue.
(2) The certification shall be in the following form:
"I,____________________of ___________________________ am a Member
in good standing of the American Academy of Actuaries and am
qualified to provide this Certification with respect to the
accelerated death benefit described in the Actuarial Memorandum to
which this Certification is attached.
I certify that:
(1) The value of the benefits provided, on an aggregated basis, in
respect of the filed accelerated death benefit, determined according
to the formula below applied over a range of underwriting classes
and plans at which the benefit is being made available, is not in any
case greater than 10%.
(NSP2 - NSP1) / NSP1
Where:
(a) NSP1 and NSP2 are determined using an effective annual
interest rate of 6%.
(b) NSP1 is the net single premium for the base policy benefits
assuming there is no accelerated death benefit.
(c) NSP2 is the net single premium for the base policy benefits
assuming that the full death benefit is paid at time of death or the
occurrence of the non-death accelerated death benefit trigger.
(2) In developing the assumptions, other than the interest
assumption, used in calculating NSP1 and NSP2, I have complied with
all applicable laws, regulations, and Actuarial Standards of Practice
(ASOPs). The assumptions used represent anticipated experience
factors, as defined in actuarial literature and by generally accepted
actuarial practice.
(3) The assumptions, other than the interest assumption, used in
calculating NSP1 and NSP2 will be reviewed at least annually by the
Company to ensure that the value of the accelerated death benefit
provided, as defined in (1) above, continues to be incidental. If,
after such review and while this accelerated death benefit is being
actively issued, the value of the benefits provided by this benefit
are no longer incidental based on then current anticipated experience
factors, the Company will discontinue offering the accelerated death
benefit which is no longer incidental.
(4) If a separate premium or cost of insurance (COI) charge is
being charged for the accelerated death benefit provided, the ratio
of the present value of the accelerated death benefit premiums or COI
charges over the life of the policy to the present value of the
policy premiums or COI charges exclusive of any riders, does not
exceed 10%. The present values in this item (4) are determined using
an effective annual interest rate of 6%."
(a) Applications, if any, or forms supporting an
application, if any, for accelerated death benefits shall contain
clear, unambiguous, short, and simple questions designed to ascertain
the health condition of the applicant. Each question shall contain
only one health status inquiry and shall require only a "yes" or "no"
answer, except that the application may include a request for the
name of any prescribed medication and the name of the prescribing
physician. If the application requests the name of any prescribed
medication or the prescribing physician, then any mistake or omission
shall not be used as a basis for the denial of a claim or the
rescission of the accelerated death benefit or life insurance policy
or certificate.
(b) The following warning shall be printed conspicuously and in
close conjunction with the applicant's signature block:
"Caution: If your answers on this application are misstated or
untrue, the insurer may have the right to deny benefits or rescind
your accelerated death benefit coverage."
(c) If an insurer does not complete medical underwriting for the
accelerated death benefit separate from underwriting for the life
insurance policy and resolve all reasonable questions arising from
information submitted on or with an application before issuing the
accelerated death benefit, then the insurer may only rescind the
accelerated death benefit or life insurance policy or certificate or
deny an otherwise valid claim upon clear and convincing evidence of
fraud or material misrepresentation of the risk by the applicant. The
evidence shall do all of the following:
(1) Pertain to the condition for which benefits are sought.
(2) Involve a chronic condition or involve dates of treatment
before the date of application.
(3) Be material to the acceptance for coverage.
(d) An accelerated death benefit may not be field issued.
(e) The contestability period for a life insurance policy or
certificate that contains an accelerated death benefit shall comply
with paragraph (3) of subdivision (c) of Section 10271.
(f) A copy of the completed application shall be delivered to the
insured at the time of delivery of the life insurance policy or
certificate that contains an accelerated death benefit.
(a) When a policyholder or certificate holder requests an
acceleration of death benefits, the insurer shall send a statement to
the policyholder or certificate holder and irrevocable beneficiary
showing any effect that the payment of the accelerated death benefit
would have on the policy's cash value, accumulation account, death
benefit, premium, policy loans, and policy liens. The statement shall
disclose that receipt of accelerated death benefit payments may
adversely affect the recipient's eligibility for Medicaid or other
government benefits or entitlements. In addition, receipt of an
accelerated death benefit payment may be taxable and assistance
should be sought from a personal tax adviser. When a previous
disclosure statement becomes invalid as a result of an acceleration
of the death benefit, the insurer shall send a revised disclosure
statement to the policyholder or certificate holder and irrevocable
beneficiary.
(b) The accelerated death benefit shall be effective not more than
30 days following the effective date of the policy provision, rider,
endorsement, or certificate.
(c) If the insurer charges a separate premium for the accelerated
death benefit, then the insurer may also offer a waiver of premium
benefit as defined in subdivision (a) of Section 10271.1. At the time
the waiver of the accelerated death benefit premium benefit is
claimed, the insurer shall explain any continuing premium requirement
to keep the underlying policy in force.
(d) An insurer shall not unfairly discriminate among insureds with
different qualifying events covered under the policy or among
insureds with similar qualifying events covered under the policy. An
insurer shall not apply further conditions on the payment of the
accelerated death benefits other than those conditions specified in
the accelerated death benefit.
(e) No less than one month after payment of an accelerated death
benefit, the insurer shall provide the policyholder or certificate
holder with a report of any accelerated death benefits paid out
during the prior month, an explanation of any changes to the policy
or certificate, death benefits, and cash values on account of the
benefits being paid out, and the amount of the remaining benefits
that can be accelerated at the end of the prior month. The insurer
may use a calendar month or policy or certificate month.
(f) The conversion benefit available to group certificate holders
on termination of employment pursuant to paragraph (2) of subdivision
(a) of Section 10209 shall include a benefit comparable to the
accelerated death benefit. This requirement may be satisfied by an
individual policy or certificate. This requirement, subject to the
approval of the commissioner, may be satisfied by arrangement with
another insurer to provide the required coverage.
(g) When payment of an accelerated death benefit results in a pro
rata reduction in cash value, the payment may be applied toward
repaying a portion of the loan equal to a pro rata portion of any
outstanding policy loans if disclosure of the effect of acceleration
upon any remaining death benefit, cash value or accumulation account,
policy loan, and premium payments, including a statement of the
possibility of termination of any remaining death benefit, is
provided to the policyholder or certificate holder. The policyholder
or certificate holder shall provide written consent authorizing any
other arrangement for the repayment of outstanding policy loans.
(a) The insurer may require a premium charge or cost of
insurance charge for the accelerated death benefit. This charge shall
be based on sound actuarial principles. In the case of group
insurance, the additional cost may also be reflected in the
experience rating.
(b) (1) The insurer may pay a present value of the face amount.
The calculation shall be based on any applicable actuarial discount
appropriate to the policy design. The interest rate or interest rate
methodology used in the calculation shall be based on sound actuarial
principles and disclosed in the contract or actuarial memorandum
required in Section 10295.4. The maximum interest rate used shall be
no greater than the greater of one of the following:
(A) The current yield on 90-day treasury bills.
(B) The current maximum statutory adjustable policy loan interest
rate.
(2) The interest rate accrued on the portion of the lien that is
equal in amount to the cash value of the life insurance policy at the
time of the supplemental benefit acceleration shall be not more than
the policy loan interest rate stated in the contract.
(c) (1) Except as provided in paragraph (2), when an accelerated
death benefit is payable, there shall not be more than a pro rata
reduction in the cash value based on the percentage of death benefits
accelerated to produce the accelerated death benefit payment.
(2) Alternatively, the payment of accelerated death benefits, any
administrative expense charges, any future premiums, and any accrued
interest can be considered a lien against the death benefit of the
life insurance policy and access to the cash value of the life
insurance policy may be restricted to any excess of the cash value
over the sum of any other outstanding loans and the lien. Future
access to additional policy loans may also be limited to any excess
of the cash value over the sum of the lien and any other outstanding
policy loans.
(d) When payment of an accelerated death benefit results in a pro
rata reduction in the cash value of the life insurance policy, the
payment shall not be applied toward repaying an amount greater than a
pro rata portion of any outstanding policy loans.
(a) An applicant for an accelerated death benefit shall
have the right to return the accelerated death benefit policy or
certificate by first-class United States mail within 30 days of its
delivery and to have the premium refunded if, after examination of
the policy or certificate, the applicant is not satisfied for any
reason. If the accelerated death benefit is purchased as an
endorsement or rider at the same time as the base life insurance
policy, then the endorsement or rider may be returned within 30 days.
The underlying life insurance policy shall be otherwise subject to
this code.
(b) The return of a life insurance policy or certificate that
contains an accelerated death benefit, or the return of an
accelerated death benefit rider or endorsement, shall void the life
insurance policy, certificate, rider, or endorsement from the
beginning, and the parties shall be in the same position as if no
policy, certificate, rider, or endorsement had been issued. All
premiums paid and any policy fee paid for the accelerated death
benefit shall be fully refunded directly to the applicant by the
insurer within 30 days after the policy, rider, endorsement, or
certificate is returned.
(c) Policies, certificates, riders, or endorsements to which this
section applies shall have a notice prominently printed, or attached
thereto, stating in substance the conditions described in
subdivisions (a) and (b).
(a) Application forms for accelerated death benefits shall
include a question designed to elicit information as to whether the
accelerated death benefit is intended to replace any long-term care
insurance presently in force. A supplementary application or other
form to be signed by the applicant containing that question may be
used.
(b) (1) An insurer, broker, agent, or other person shall not cause
a policyholder to replace a long-term care insurance policy
unnecessarily. This section shall not be construed to allow an
insurer, broker, agent, or other person to cause a policyholder to
replace a long-term care insurance policy or life insurance policy
subject to this section that will result in a decrease in benefits
and an increase in premium.
(2) It shall be presumed that any third or greater policy sold to
a policyholder in any 12-month period is unnecessary within the
meaning of this section. This section shall not apply to those
instances in which a policy is replaced solely for the purpose of
consolidating policies with a single insurer.
(c) Upon determining that a sale will involve a replacement of a
life insurance policy subject to this section or replacement of a
long-term care insurance policy, an insurer or its agent shall
furnish the applicant, prior to issuance or delivery of a policy,
certificate, rider, or endorsement, a notice regarding replacement of
life insurance that includes an accelerated death benefit, or
long-term care insurance coverage with a life insurance policy or
certificate that contains an accelerated death benefit. One copy of
this notice shall be retained by the applicant and an additional copy
signed by the applicant shall be retained by the insurer. The
required notice shall be provided in the following form:
"NOTICE TO APPLICANT REGARDING REPLACEMENT OF LONG-TERM CARE
INSURANCE OR LIFE INSURANCE INCLUDING ACCELERATED DEATH BENEFITS
According to (your application) (information you have furnished),
you intend to lapse or otherwise terminate existing life insurance or
long-term care insurance and replace it with a life insurance policy
with an accelerated death benefit to be issued by (company name)
Insurance Company. Your new accelerated death benefit coverage
provides 30 days within which you may decide, without cost, whether
you desire to keep the coverage. Please note that your underlying
life insurance policy may only provide for a 10-day period during
which you may decide, without cost, whether you will keep the
coverage. For your own information and protection, you should be
aware of, and seriously consider, certain factors that may affect the
insurance protection available to you under the new coverage.
This accelerated death benefit is NOT Nursing Home, Home Care, or
Long-Term Care Insurance, and it is not intended or designed to
eliminate your need for that coverage. There are no restrictions or
limitations on the use of the accelerated death benefit proceeds.
If you want long-term care insurance, you should consult with an
insurance agent licensed to sell that insurance, inquire with the
insurance company offering the accelerated death benefits, or visit
the California Department of Insurance Internet Web site
(www.insurance.ca.gov) that provides information regarding long-term
care insurance.
If you want to replace existing coverage with life insurance that
includes an accelerated death benefit, you should note the following:
(1) Receipt of accelerated death benefits may be taxable. Prior to
electing to buy the accelerated death benefit, policyholders or
certificate holders should seek assistance from a qualified tax
adviser.
(2) Receipt of accelerated death benefits may affect eligibility
for public assistance programs, such as Medi-Cal or Medicaid. Prior
to electing to buy the accelerated death benefit, the applicant/buyer
should consult with the appropriate social services agency
concerning how receipt of accelerated death benefits may affect that
eligibility.
You may wish to secure the advice of your present insurer or its
agent regarding the proposed replacement of your present coverage.
This is not only your right, but it is also in your best interest to
make sure you understand all the relevant factors involved in
replacing your present coverage.
If, after due consideration, you still wish to terminate your
present coverage and replace it with new coverage, be certain to
truthfully and completely answer all questions on the application
concerning your medical health history. Failure to include all
material medical information on an application may provide a basis
for the company to deny any future claims and to refund your premium
as though your coverage had never been in force. After the
application has been completed and before you sign it, reread it
carefully to be certain that all the information has been properly
recorded.
The above "Notice to Applicant" was delivered to me on:
(Date)
(Applicant's Signature)"
(d) The replacement notice shall include the following statement
except when the replacement coverage is group insurance:
"COMPARISON TO YOUR CURRENT COVERAGE: I have reviewed your current
coverage. To the best of my knowledge, the replacement of insurance
involved in this transaction materially improves your position for
the following reasons:
____ Additional or different benefits
(please specify) ______.
____ No change in benefits, but lower premiums.
____ Fewer benefits and lower premiums.
____ Other (please specify) ______.
(Signature of Agent and Name of Insurer)
(Signature of Applicant)
(Date)
(e) In recommending the purchase or replacement of any policy or
certificate issued under this section, an agent shall make reasonable
efforts to determine the appropriateness of a recommended purchase
or replacement.
(f) The replacing policy or certificate shall not contain a
provision establishing a new waiting period in the event existing
coverage is converted to, or replaced by, a new or other form within
the same insurer, except with respect to an increase in benefits
voluntarily selected by the insured individual or group policyholder.
An insurer may not:
(a) Cancel, nonrenew, or otherwise terminate an accelerated death
benefit on the grounds of the age or the deterioration of the mental
or physical health of the insured individual or certificate holder.
(b) Terminate a policy, certificate, or rider, or contain a
provision that allows the premium for an in-force policy,
certificate, or rider, to be increased due to the divorce of a
policyholder or certificate holder.
(a) An accelerated death benefit shall not be advertised
or marketed as long-term care insurance, nursing home insurance, or
home care insurance. Any advertisement, description, comparison,
marketing material, or illustration shall state in bold type:
"This is a life insurance benefit that also gives you the option
to accelerate some or all of the death benefit in the event that you
meet the criteria for a qualifying event described in the policy.
This policy or certificate does not provide long-term care insurance
subject to California long-term care insurance law. This policy or
certificate is not a California Partnership for Long-Term Care
program policy. This policy or certificate is not a Medicare
supplement (policy or certificate)."
An insurer shall also include in any advertisement or marketing
materials for these insurance policies all of the following:
(1) A statement that the policy or certificate pays proceeds that
are or are not intended to receive favorable tax treatment under
Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)).
(2) A description of the accelerated death benefits provided by
the policy, including a description of the acceleration of the death
benefit to pay an unrestricted cash benefit when the insured has
become chronically ill or otherwise eligible for benefits from a
qualified event.
(3) A comparison between the benefits provided by life insurance
policies, riders, or endorsements that contain accelerated death
benefits and the benefits provided by long-term care insurance.
(b) Advertising for term life insurance policies or certificates
that contain an accelerated death benefit to be attached to an
existing term life policy shall include a prominent statement that
the accelerated death benefit will terminate with the policy.
(c) On or after January 1, 2014, every insurer offering
accelerated death benefits shall file with the commissioner copies of
all printed advertising for accelerated death benefits that the
insurer proposes to disseminate in the state prior to use of that
material. The commissioner shall have the authority to disapprove any
advertising that does not meet the requirements of this code. If the
commissioner disapproves the advertising, the insurer shall not use
and shall stop using the disapproved advertising. Nothing in this
subdivision shall be construed as requiring prior approval of
advertising prior to dissemination in this state.
(a) Insurers shall ensure that agents offering,
marketing, or selling accelerated death benefits on their behalf are
able to describe the differences between benefits provided under an
accelerated death benefit and benefits provided under long-term care
insurance, as follows:
(1) The difference between the benefits afforded to an insured
through an accelerated death benefit and a long-term care insurance
policy or rider.
(2) The differences between benefit eligibility criteria.
(3) Whether an elimination period applies to either an accelerated
death benefit or long-term care insurance and a description of the
elimination period.
(4) The benefits under the accelerated death benefit or long-term
care insurance if benefits are never needed.
(5) The benefits under the accelerated death benefit or long-term
insurance if benefits are needed.
(6) Restrictions on benefit amounts.
(7) Tax treatment of benefits.
(8) Income and death benefit considerations.
(b) Completion of California agent education or continuing
education for long-term care insurance shall meet the requirements of
this section.
In addition to other unfair trade practices described in
this code, the following acts and practices in the sale of insurance
under this article are prohibited:
(a) Twisting. Knowingly making any misleading representation or
incomplete or fraudulent comparison of any insurance policies or
insurers for the purpose of inducing, or tending to induce, any
person to lapse, forfeit, surrender, terminate, retain, pledge,
assign, borrow on or convert any insurance policy, or to take out a
policy of insurance with another insurer.
(b) High pressure tactics. Employing any method of marketing
having the effect of, or tending to, induce the purchase of insurance
through force, fright, threat, whether explicit or implied, or undue
pressure to purchase or recommend the purchase of insurance.
(c) Cold lead advertising. Making use directly or indirectly of
any method of marketing that fails to disclose in a conspicuous
manner that a purpose of the method of marketing is solicitation of
insurance and that contact will be made by an insurance agent or
insurance company.
(a) Accelerated death benefits shall comply with the
provisions in Sections 10113.71 and 10113.72.
(b) Every insurer offering term life insurance with accelerated
death benefits or any rider that provides for accelerated death
benefits described in Section 10295 shall also offer a waiver of
premium benefit for the life insurance premium and any premium
charged for the accelerated death benefit as described in Section
10271.1.
(c) Every insurer offering a cash value life insurance policy or
rider offering accelerated death benefits described in Section 10295
shall disclose all premium default protection options in the policy
and at the time of the application, including waiver of premium
options available under Section 10271.1 and automatic premium loans.
(a) Except at the request of the policyholder or
contractholder, all accelerated death benefit provisions or
supplemental contracts shall be renewable for the life of the
underlying life insurance policy, provided the premiums are timely
paid. The statement shall be prominently displayed on the first page
of the accelerated death benefit policy or rider.
(b) If an accelerated death benefit is offered with an underlying
term life insurance policy, the accelerated death benefit shall
include a prominent statement on page one that the accelerated death
benefit terminates with the policy.
Termination of an accelerated death benefit shall not
prejudice the payment of benefits for any qualifying event that
occurred while the accelerated death benefit was in force.
An insurer that fails to conform to the requirements
provided under this article shall be subject to Article 6.5
(commencing with Section 790) of Chapter 1 of Part 2 of Division 1.
Accelerated death benefits shall not limit or exclude
coverage by type of illness, treatment, medical condition, or
accident, except under the circumstances described in paragraphs (1)
to (4), inclusive, of subdivision (g) of Section 10271.
A policy, certificate, rider, or endorsement shall
include a provision giving the policyholder or certificate holder the
right to appeal to the insurer a decision regarding benefit
eligibility.