N.Y. ISC Law § 4510 — New York Code / Act ISC / Article 45 / Section 4510
Life insurance certificates; required and prohibited provisions
Status: in_force

§ 4510. Life insurance certificates; required and prohibited\nprovisions.  (a) No certificate or other evidence of a life insurance\ncontract shall be delivered or issued for delivery in this state by any\nauthorized society unless it contains in substance the following\nprovisions, or provisions which in the opinion of the superintendent are\nmore favorable to the insured members, except that such provisions as\nare not applicable to single premium or term life insurance shall to\nthat extent not be incorporated in such certificate or contract:\n  (1) For certificates in which the amount and frequency of premiums may\nvary, a provision that, after payment of the first premium, the insured\nis entitled to a grace period of not less than sixty-one days, beginning\non the day when the fraternal benefit society determines that the\ncertificate's net cash surrender value is insufficient to pay the total\ncharges necessary to keep the certificate in force for one month from\nthat day within which to pay sufficient premium to keep the policy in\nforce for three months from the date the insufficiency was determined.\nDuring such grace period the certificate shall continue in full force,\nbut in case the certificate becomes a claim, on account of death,\nmaturity or other benefit accrued during such grace period before an\namount of premium sufficient to keep the certificate in force is paid,\nan amount of premium sufficient to keep the policy in force until the\nday the certificate became a claim may be deducted from any amount\npayable in any settlement under the certificate. For all other\ncertificates, a provision that the insured is entitled to a grace period\nof not less than one month or thirty days within which the payment of\nany premium after the first may be made, and that during such grace\nperiod the certificate shall continue in full force, but in case the\ncertificate becomes a claim, on account of death, maturity or other\nbenefit accrued during such grace period before the overdue premiums are\npaid, the amount of such premium or premiums may be deducted from any\namount payable in any settlement under the certificate.\n  (2) A provision that the certificate shall be incontestable after it\nhas been in force during the lifetime of the insured member for a period\nof two years from its date of issue, and, if a certificate provides that\nthe death benefit provided by the certificate may be increased, or other\ncertificate provisions changed, upon the application of the certificate\nholder and the production of evidence of insurability, a provision that\nthe certificate with respect to each such increase or change shall be\nincontestable after two years from the effective date of such increase\nor change, except in each case for (i) non-payment of premiums, and (ii)\nviolation of the provisions of the certificate relating to military or\nnaval service, and, at the option of the society, (iii) provisions\nrelating to benefits in the event of total and permanent disability, and\n(iv) provisions which grant additional insurance against death by\naccident or accidental means.\n  (3) A provision that if it shall be found at any time before final\nsettlement under the certificate that the age of the insured (or the age\nof the beneficiary, if considered in determining the premium) has been\nmisstated, and the discrepancy and the premium payment involved have not\nbeen adjusted, the amount payable under the certificate shall be such as\nthe premium would have purchased at the correct age, except that if the\ncorrect age was not an insurable age under the society's charter,\nconstitution or by-laws, and such charter, constitution or by-laws so\nprovide, only the net mortuary payments made thereunder shall be\nreturned or, at the option of the society, the amount payable under the\ncertificate shall be such as the premium would have purchased at the\ncorrect age according to the society's promulgated rates and any\nextension thereof based on actuarial principles.\n  (4) A provision that the holder of a certificate shall be entitled to\nhave the certificate reinstated at any time within three years from the\ndue date of the premium in default, unless the cash value has been duly\npaid or the period of extended insurance has expired, upon the\nproduction of evidence of insurability and good health satisfactory to\nthe society and the payment of all overdue premiums and any other\nindebtedness to the society upon such certificate together with interest\non such premiums, at a rate not exceeding six percent per annum payable\nannually and interest on such indebtedness at a rate or rates not\nexceeding the applicable loan rate or rates determined in accordance\nwith the certificate's provisions. Such provision shall be required only\nif the certificate provides for termination or lapse in the event of a\ndefault in making a regularly scheduled premium. Such provision may give\nthe society the right to contest the reinstated certificate, as to\nstatements made to procure reinstatement, within a period after date of\nreinstatement not exceeding the period of contestability prescribed in\nthe original certificate with the same exceptions permitted by paragraph\ntwo hereof.\n  (5) In the case of certificates which cause on a basis guaranteed in\nthe certificate unscheduled changes in benefits or premiums, or which\nprovide an option for changes in benefits or premiums other than a\nchange to a new certificate, a provision specifying the mortality table,\ninterest rate and method used in calculating cash surrender values and\nthe paid-up nonforfeiture benefits available under the certificate. In\nthe case of all other certificates, a provision specifying the\nnonforfeiture options available under the certificate in the event of\ndefault in a premium payment after premiums have been paid for a\nspecified period, together with a table showing, in figures, the options\nso available, and also the loan values, if any, available during each of\nthe first twenty years after the issuance of the certificate. Such\noptions shall conform with the requirements of section four thousand\nfive hundred eleven of this article.\n  (6) A provision for certificates issued on and after January first,\nnineteen hundred seventy-five, that after three full years' premiums\nhave been paid or, in the case of certificates that provide that the\ncertificate holder may vary the amount and frequency of premiums to be\npaid to the society, after three years from the issue of the\ncertificate, if the certificate is in force and not in default, the\nsociety will, at any time while the certificate is in force, advance, on\nproper assignment or pledge of the certificate and on the sole security\nthereof, a sum equal to, or at the option of the person entitled\nthereto, less than, the amount of the cash surrender value calculated in\naccordance with the provisions of section four thousand five hundred\neleven of this article; and that the society may deduct from such loan\nvalue (in addition to the indebtedness deducted in determining such\nvalue) any unpaid balance of the premium for the current certificate\nyear; and that if the loan is made or repaid on a date other than the\nanniversary of the certificate the society may collect interest for the\nportion of the current certificate year on a pro rata basis. The\ncertificate shall provide, at the option of the society, either that (i)\nany such loan shall bear interest at a maximum rate of not more than\nseven and four-tenths per centum per annum if payable in advance or the\nequivalent effective rate of interest if otherwise payable, or (ii) any\nsuch loan shall bear interest at a rate not in excess of an adjustable\nmaximum rate established from time to time by the society as permitted\nby law. If the certificate provides for an adjustable rate, the\ncertificate shall specify the regular intervals at which the interest\nrate is to be determined which shall be at least once every twelve\nmonths, but not more frequently than once in any three month period. The\ncertificate may further provide that if the interest on the loan is not\npaid when due, it shall be added to the existing loan, and shall bear\ninterest at the applicable rate or rates payable on the loan determined\nin accordance with the provisions of the certificate; and subject to\nsubsection (e) of section three thousand two hundred six of this chapter\nmay further provide that if and when the total indebtedness on the\ncertificate, including interest due or accrued, equals or exceeds the\namount of the loan value thereof at such time, and if at least thirty\ndays' prior notice shall have been given in the manner provided in\nsection three thousand two hundred eleven of this chapter, then the\ncertificate shall terminate and become void. This provision shall not\napply to term insurance.\n  Any certificate which provides for the crediting of additional amounts\npursuant to section four thousand five hundred eighteen of this article\nmay also provide that if any indebtedness is owed to the society on any\npart of the loan value which would otherwise be credited with additional\namounts, such additional amounts may be reduced so that the total\namounts credited on such part are so credited at a rate that is up to\ntwo percent per annum less than the applicable loan interest rate\ncharged or at such other rate as the superintendent, upon the society's\ndemonstrating justification therefor, may allow.\n  (7) If in the judgment of the superintendent, the charter,\nconstitution or by-laws of the society provide that the violation of any\nsection or sections thereof shall result in the reduction or termination\nof any benefit payable under the certificate, then a provision which\neither:\n  (A) recites fully all such sections,\n  (B) sets forth the substance of all such sections, or\n  (C) states in substance that no section of the charter, constitution\nor by-laws shall be relied upon or be used to reduce or terminate any\nbenefit payable under the certificate unless such section is\nspecifically set forth or referred to in the certificate.\n  (8) The provision in the constitution or by-laws required by\nsubsection (g) of section four thousand five hundred four of this\narticle.\n  (9) A provision that in case the by-laws of the society provide for\nexpulsion or suspension of a member, any member so expelled or suspended\nexcept for non-payment of a premium or contribution, or within the\ncontestable period for material misrepresentations in his application\nfor membership, shall have the privilege of maintaining his insurance in\nforce by continuing payment of the required premium or contribution\npayable under the certificates and of such other assessments as may be\nrequired of members holding certificates of the same class.\n  (10) If issued for delivery in this state by any authorized foreign or\nalien society, a provision that the rights or obligations of the insured\nmember under such certificate or other evidence of such life insurance\ncontract or of any person rightfully claiming thereunder shall be\ngoverned by the laws of this state.\n  (11) A provision that the society shall annually ascertain and\napportion any divisible surplus accruing on the certificate.\n  (12) In any certificate under which additional amounts may be credited\npursuant to section four thousand five hundred eighteen of this article,\nprovisions stating\n  (A) the guaranteed factors of mortality, expense and interest, and the\nmethod used by the society in calculating actual certificate values;\n  (B) that such additional amount shall be nonforfeitable after the\neffective date of their crediting except for any charges imposed under\nthe certificate which are not greater than those allowed under\nsubsection (n-1) or any market value adjustment made pursuant to\nsubsection (n-2) of section four thousand two hundred twenty-one of this\nchapter; and\n  (C) that the society shall credit any such amounts no less frequently\nthan annually during such period.\n  (13) Operative on January first, nineteen hundred eighty-five or with\nrespect to certificates issued by any particular society operative on\nsuch earlier date as the society may have specified in a written notice\nfiled with the superintendent as the date the society elects to begin\ncompliance with the provisions of this paragraph, a provision that (i)\nif the death of the insured shall occur within a period for which the\npremium has been paid, the society shall add to the certificate proceeds\na refund of the pro rata portion of premium paid for any period beyond\nthe end of the certificate month in which death occurred, provided such\npremium was not waived under any waiver of premiums benefit included in\nthe certificate or attached thereto, and (ii) if the death of the\ninsured shall occur within a period for which the premium has not been\npaid, but within the grace period provided in the certificate, the\nsociety may deduct from the certificate proceeds that portion of overdue\npremium as applies to the period ending with the last day of the\ncertificate month in which death occurred; provided however, that the\nprovisions of this paragraph shall not be applicable to single premium\ncertificates and paid-up certificates.\n  (b) (1) No such certificate or other evidence of a life insurance\ncontract delivered or issued for delivery in this state shall contain\nany exclusory or restrictive provisions relating to liability in the\nevent of death caused in a certain specified manner except the following\nprovisions, or provisions which in the opinion of the superintendent are\nsubstantially the same or more favorable to holders of such certificate\nor contracts, excluding or restricting coverage in the event of death:\n  (A) as a result of war or an act of war, if the cause of death occurs\nwhile the insured is serving in the military, naval or air forces of any\ncountry, international organization or combination of countries or in\nany civilian noncombatant unit serving with such forces, provided such\ndeath occurs while in such forces or units or within six months after\ntermination of service in such forces or units;\n  (B) as a result of the special hazards incident to service in the\nmilitary, naval or air forces of any country, international organization\nor combination of countries or in any civilian non-combatant unit\nserving with such forces, if the cause of death occurs while the insured\nis serving in such forces or units and is outside the home area,\nprovided such death occurs outside the home area or within six months\nafter the insured's return to the home area while in such forces or\nunits or within six months after the termination of service in such\nforces or units, whichever is earlier;\n  (C) as the result of war or an act of war, within two years from the\ndate of issue of the certificate, while the insured is not in such\nforces or units, if the cause of death occurs while the insured is\noutside the home area; provided such death occurs outside the home area\nor within six months after the insured's return to the home area;\n  (D) as a result of suicide within two years from the date of issue of\nthe certificate;\n  (E) as a result of aviation under conditions specified in the\ncertificate; or\n  (F) within two years from the date of issue of the certificate as a\nresult of specified hazardous occupations, or while the insured is a\nresident of a specified foreign country or countries.\n  (2) The provisions of this paragraph shall apply only to subparagraphs\n(A), (B) and (C) of paragraph one hereof.\n  (A) As used in such subparagraphs, "home area" means the states of the\nUnited States, the District of Columbia and Canada; "war" includes, but\nis not limited to, any war declared or undeclared, and armed aggression\nresisted by the military, naval or air forces of any country,\ninternational organization or combination of countries; "act of war"\nmeans any act peculiar to military, naval, or air operations in time of\nwar; and "special hazards incident to service" includes, but is not\nlimited to, those hazards resulting in the insured's death being\npresumed by reason of being missing or missing in action, and those\nhazards resulting in death from disease or injury, accidental or\notherwise, to which a person serving in, or with, such forces or units\nis exposed in the line of duty.\n  (B) In permitting such war exclusions it is the legislative intent\nthat such exclusions are not to be construed or interpreted as\nexclusions because of the status of the insured as a member of such\nforces or units or because of the presence of the insured as a civilian\nin a combat area or area adjacent thereto. Such permissible exclusions\nshall be construed and interpreted according to the fair import of their\nterms so as not to exclude deaths due to diseases or accidents which are\ncommon to the civilian population and are not attributable to special\nhazards to which a person serving in such forces or units is exposed in\nthe line of duty.\n  (C) The superintendent may, by regulation, prescribe reasonable\nconditions relative to the use of such war exclusion provisions.\n  (3) In the event of death as to which there is such an exclusion or\nrestriction, the society shall pay the reserve on the face amount of the\ncertificate, computed according to the mortality table and interest rate\nspecified in the certificate, together with the reserve for any paid-up\nadditions thereto, and any dividends standing to the credit of the\ncertificate, less any indebtedness to the society on the certificate,\nincluding interest due or accrued; provided that if the certificate\nshall have been in force for not more than two years the society shall\npay the amount of the gross premiums charged on the certificate less\ndividends paid in cash or used in the payment of premiums thereon and\nless any indebtedness to the society on the certificate; including\ninterest due or accrued.\n  (4) Nothing contained in this subsection shall apply to any provision\nin a life insurance certificate for additional benefits in the event of\ndeath by accident or by accidental means.\n  (5) If a certificate provides that the death benefit may be increased,\nor other certificate provisions changed, upon the application of the\ncertificate holder and the production of evidence of insurability, the\ncertificate may also provide that the two year exclusions permitted\nunder subparagraph (C), (D) or (F) of paragraph one of this subsection\nshall run from the date of issue of the certificate except that it shall\nrun from the effective date of each subsequent increase or change with\nrespect to each such increase or change.\n  (c) No such certificate or other evidence of a life insurance contract\nshall be issued or delivered in this state by any society if, in\nsubstance, any of the following provisions are in any way made a part of\nthe contract:\n  (1) any provision limiting the time within which any action at law or\nin equity may be commenced to less than eighteen months after the cause\nof action shall accrue;\n  (2) any provision for forfeiture, lapse or termination of any\ncertificate because of failure to repay any loan on the certificate or\nto pay interest on such loan, while the total unpaid amount of any loan\nor loans under such certificate, including interest, is less than the\nloan value thereof; or\n  (3) any provision whereby the suspension or expulsion of the insured\nmember, or change of occupation, or any other violation of the terms and\nconditions of the insurance contract shall result in the loss or\nreduction of the cash surrender value or other withdrawal equity, if\nany, available by the terms of such certificate.\n