N.Y. ISC Law § 4220 — New York Code / Act ISC / Article 42 / Section 4220
Life insurance and annuities; nonforfeiture benefits under defaulted contracts
Status: in_force

§ 4220. Life insurance and annuities; nonforfeiture benefits under\ndefaulted contracts. (a) (1) This section shall apply only to those\npolicies and contracts issued prior to the operative date specified in\nsection four thousand two hundred twenty-one of this article.\n  (2) Except as otherwise provided in this chapter, in the event of\ndefault in payment of a premium or a note therefor or any interest on\nsuch note, after three full years' premiums have been paid on a policy\nof life insurance issued by a domestic insurance company on or after\nJanuary first, nineteen hundred forty, such company, upon surrender of\nsuch policy within the period of three months from the due date of the\npayment in default, shall pay to the person entitled thereto a cash\nsurrender value not less than the excess, if any, of subparagraph (A)\nover subparagraph (B) as follows:\n  (A) The reserve on the policy at the due date of the premium in\ndefault (including the reserve for any paid-up additions thereto and\nexcluding the reserve for any additional benefits in the event of death\nby accident or for benefits in the event of total and permanent\ndisability or for any continuous instalment payments to the beneficiary\nor to the insured and the beneficiary incidental to the life insurance\nbenefit), determined on the basis, in accordance with section four\nthousand two hundred seventeen of this article, specified in the policy,\nand in addition to such reserve, the amount of any dividends standing to\nthe credit of the policy;\n  (B) the sum of any indebtedness to the company on the policy,\nincluding interest due or accrued, and a surrender charge equal to two\nand one-half per centum of the face amount of such policy and of any\npaid-up additions thereto, and if the policy be surrendered within the\nperiod above specified and after the expiration of the grace period, if\nany, following the due date of the payment in default, then there may be\nadded to the sum to be deducted the value of any extended term insurance\ngranted (determined as hereinafter specified) during the period between\nthe expiration of the grace period and the date of surrender of the\npolicy.\n  (3) The person entitled to such cash surrender value may, upon demand\ntherefor within three months after the due date of the payment in\ndefault, elect to receive in lieu of such cash surrender value either\nextended term insurance (including pure endowment benefits, if any) or\nreduced paid-up insurance under the policy, for a term, in the case of\nextended term insurance, and for an amount, in the case of reduced\npaid-up insurance, which, in either case, shall be not less than that\nprovided by applying such cash surrender value at the date of default to\nprovide such extended term or paid-up insurance, computed at net rates\nat the attained insurance age of the insured and on the same basis used\nfor the computation of such cash surrender value, except that in the\ncase of policies issued on a substandard basis or policies for which the\nreserves are computed upon the American Men Ultimate Table of Mortality,\nthe term of such extended insurance may be computed upon rates of\nmortality not greater than one hundred thirty per centum of those shown\nby the table specified in the policy for the computation of the reserve.\nThe period of extended term insurance shall date from the due date of\nthe premium in default. Reduced paid-up insurance shall be participating\nif the policy be participating.\n  (4) The amount of the extended term insurance shall be not less than\nthe amount of life insurance under the policy as expressed in the policy\nwith the approval of the superintendent (including any paid-up additions\nthereto and excluding any additional benefits on account of death by\naccident or any continuous instalment payments to the beneficiary or to\nthe insured and the beneficiary incidental to the life insurance\nbenefit), decreased by the amount of any indebtedness to the company on\nthe policy, including interest due or accrued. In the case of any\nendowment life insurance policy, if the sum used to provide extended\nterm insurance shall be more than sufficient to continue the insurance\nto the end of the endowment period, the excess shall be used to provide\na pure endowment benefit at the end of the endowment period.\n  (5) Extended term insurance and reduced paid-up insurance may exclude\nadditional benefits in the event of death by accident and benefits in\nthe event of total and permanent disability, and extended term insurance\nmay be without participation in surplus and without the right to loans.\n  (6) If no other option expressed in the policy be so selected by such\nperson within three months after the due date of the premium in default,\nthe amount of such nonforfeiture value shall be applied to continue the\ninsurance in force from the due date of the premium in default as\nextended term insurance as hereinbefore provided.\n  (7) The policy shall specify the reserve basis used in determining\nnonforfeiture benefits and cash surrender values.\n  (8) This subsection shall not apply to any pure endowment, annuity, or\nreversionary annuity contract, nor to any term insurance of thirty years\nor less.\n  (9) In the case of ordinary or industrial life insurance policies\nissued on a substandard basis the company shall not be required to\nprovide extended term insurance as a nonforfeiture benefit.\n  (10) That the company must provide, to any policyowner who so requests\nin writing, within twenty business days from the date the written\nrequest is received by the company, a statement of the cash surrender\nvalue of the policy.\n  (b) (1) Every contract issued after January first, nineteen hundred\nforty, by any domestic life insurance company which provides for a\ndeferred annuity on the life of the insured or of the annuitant, or for\na pure endowment contract, except a contract paid for by a single\npremium, shall provide that if the contract after having been in force\nfor three full years, shall by its terms lapse or become defaulted\nbecause any stipulated payment to the company shall not have been made,\nthe reserve on such contract, computed according to the standard adopted\nby such company pursuant to section four thousand two hundred seventeen\nof this article, shall, after deducting a surrender charge not to exceed\nthe limits hereinafter specified, and after deducting the amount of the\nunpaid balance, including interest due or accrued, on any loans on such\ncontract by the company, be applied as a net single premium according to\nsuch standard, for the purchase of a paid-up annuity or pure endowment\ncontract, which shall be payable by the company under the same terms and\nconditions, except as to amount, as the original contract.\n  (2) The surrender charge to be deducted pursuant to paragraph one\nhereof shall not exceed the greater of the following amounts:\n  (A) thirty-five percent of the gross annual stipulated payment\nrequired by the holder of such contract by the terms thereof; or\n  (B) twenty-five dollars per one hundred dollars a year income provided\nby the contract at the normal retirement age.\n  (3) If such contract provides for a cash surrender value at the option\nof the holder of such contract and in lieu of such paid-up annuity or\npure endowment contract, such cash surrender value shall be an amount at\nleast equal to such net single premium and shall be payable to the\nholder of such contract upon demand therefor and the surrender of such\ncontract within ninety days after the date of lapse or default.\n  (4) The paid-up annuity or pure endowment contract prescribed by this\nsection shall not include additional benefits in the event of accidental\ndeath or benefits in the event of total and permanent disability and, at\nthe option of the insurer, may be without future participation in\nsurplus and without the right to loans.\n  (c) The company may provide in any policy or contract that the payment\nof any cash surrender value may be deferred for not exceeding six months\nafter demand therefor with surrender of the policy or contract as\nprovided above, and the amount payable shall bear interest during any\nsuch deferred period of thirty days or more at the rate specified in the\npolicy for the computation of the reserve.\n  (d) The surrender value and other nonforfeiture benefits of any lapsed\nor defaulted policy of life insurance or annuity contract issued by any\ndomestic life insurance company before January first, nineteen hundred\nforty shall be determined in accordance with the law applicable at the\ndate of issuance of such policy or contract.\n  (e) No foreign or alien life insurance company shall deliver or issue\nfor delivery in this state any policy of life insurance or any annuity\nor pure endowment contract which does not contain the provisions\nrequired by subsection (a) or (b) hereof, as the case may be, or\nprovisions which, in the opinion of the superintendent, are at least\nequally favorable to policyholders.\n