N.Y. ISC Law § 3203 — New York Code / Act ISC / Article 32 / Section 3203
Individual life insurance policies; standard provisions as to contractual rights and responsibilities of policyholders and insurers
Status: in_force

§ 3203. Individual life insurance policies; standard provisions as to\ncontractual rights and responsibilities of policyholders and insurers.\n(a) All life insurance policies, except as otherwise stated herein,\ndelivered or issued for delivery in this state, shall contain in\nsubstance the following provisions, or provisions which the\nsuperintendent deems to be more favorable to policyholders:\n  (1) that, for policies in which the amount and frequency of premiums\nmay vary, after payment of the first premium, the policyholder is\nentitled to a sixty-one day grace period, beginning on the day when the\ninsurer determines that the policy's net cash surrender value is\ninsufficient to pay the total charges necessary to keep the policy in\nforce for one month from that day, within which to pay sufficient\npremium to keep the policy in force for three months from the date the\ninsufficiency was determined. For all other policies, after payment of\nthe first premium, the policyholder is entitled to a thirty-one day\ngrace period or of one month following any subsequent premium due date\nwithin which to make payment of the premium then due. During such grace\nperiod, the policy shall continue in full force;\n  (2) that if the death of the insured occurs within the grace period\nprovided in the policy, the insurer may deduct from the policy proceeds\nthe portion of any unpaid premium applicable to the period ending with\nthe last day of the policy month in which such death occurred, and if\nthe death of the insured occurs during a period for which the premium\nhas been paid, the insurer shall add to the policy proceeds a refund of\nany premium actually paid for any period beyond the end of the policy\nmonth in which such death occurred, provided such premium was not waived\nunder any policy provision for waiver of premiums benefit. This\nparagraph shall not apply to single premium or paid-up policies;\n  (3) that the policy shall be incontestable after being in force during\nthe life of the insured for a period of two years from its date of\nissue, and that, if a policy provides that the death benefit provided by\nthe policy may be increased, or other policy provisions changed, upon\nthe application of the policyholder and the production of evidence of\ninsurability, the policy with respect to each such increase or change\nshall be incontestable after two years from the effective date of such\nincrease or change, except in each case for nonpayment of premiums or\nviolation of policy conditions relating to service in the armed forces.\nAt the option of the insurer, provisions relating to benefits for total\nand permanent disability and additional benefits for accidental death\nmay also be excepted;\n  (4) that the policy, together with the application therefor if a copy\nof such application is attached to the policy when issued, shall\nconstitute the entire contract between the parties; but in the case of\npolicies that provide that the death benefit or other policy provisions\nmay be changed by written application or by the written notice of\nexercise of one or more options provided in the policy, or automatically\nby the terms of the policy, the policy may also contain a provision that\nwhen such written application or notice of exercise of an option is\naccepted by the insurer or a notice of any change is issued by the\ninsurer and, in each case, a copy of such application or notice is\nreturned by mail or delivered to the policyholder at the policyholder's\nlast post office address known to the insurer, such application or\nnotice shall become part of the entire contract between the parties;\n  (5) that if the age of the insured has been misstated, any amount\npayable or benefit accruing under the policy shall be such as the\npremium would have purchased at the correct age;\n  (6) that the insurer shall annually ascertain and apportion any\ndivisible surplus accruing on the policy;\n  (7) (A) that, in the case of policies which provide for the crediting\nof additional amounts pursuant to subsection (b) of section four\nthousand two hundred thirty-two of this chapter or under which cash\nsurrender values are adjusted in accordance with a market-value\nadjustment formula or which cause on a basis guaranteed in the policy\nunscheduled changes in benefits or premiums or which provide an option\nfor changes in benefits or premiums other than a change to a new policy,\nspecifies the mortality table, interest rate and method used in\ncalculating cash surrender values and any paid-up nonforfeiture benefits\navailable under the policy;\n  (B) that, in the case of all other policies, specifies the cash\nsurrender values and other options available in the event of default in\na premium payment after premiums have been paid for a specified period,\ntogether with a table showing, in figures, all options available during\neach of the policy's first twenty years. Such options shall comply with\nthe requirements of subsection (a) of section four thousand two hundred\ntwenty or section four thousand two hundred twenty-one of this chapter;\n  (8) (A) that, for a policy not in default and where three full years'\npremiums have been paid or, in the case of a policy where the\npolicyholder may vary the amount and frequency of premiums to be paid to\nthe insurer, after three years from the date of issue of the policy, the\npolicyholder shall be entitled to a loan in an amount not exceeding the\nloan value, under the conditions specified in section four thousand two\nhundred twenty-two of this chapter. However, a policyholder shall be\nentitled to a loan from an equity index account that credits additional\namounts less frequently than annually at any time the equity index\npolicy has a loan value;\n  (B) that the sole security for the loan shall be assignment or pledge\nof the policy;\n  (C) that, unless the policy provides for the crediting of additional\namounts pursuant to subsection (b) of section four thousand two hundred\nthirty-two of this chapter or provides for the adjustment of the policy\nloan value in accordance with a market-value adjustment formula or\ncauses on a basis guaranteed in the policy unscheduled changes in\nbenefits or premiums or provides an option for changes in benefits or\npremiums other than a change to a new policy, the policy shall contain a\ntable showing the loan values, if any, available during each of the\npolicy's first twenty years;\n  (D) that, in making a loan, the insurer may reduce the loan value (in\naddition to the indebtedness deducted in determining such value) by any\nunpaid premium balance for the current policy year;\n  (E) that, if the loan is made or repaid on a date other than the\nanniversary of the policy, the insurer may collect interest for the\nportion of the current policy year on a pro rata basis;\n  (F) that, at the option of the insurer, the loan shall bear interest\n(i) at a maximum rate of not more than seven and four-tenths per centum\nper annum if payable in advance or the equivalent effective rate of\ninterest if otherwise payable, or (ii) at a rate not in excess of an\nadjustable maximum rate established from time to time by the insurer as\npermitted by law. If the policy provides for an adjustable rate, the\npolicy shall specify the regular intervals at which the interest rate is\nto be determined which shall be at least once every twelve months but\nnot more frequently than once in any three month period;\n  (G) the policy may further provide: (i) that if the interest on the\nloan is not paid when due, it shall be added to the existing loan, and\nshall bear interest at the applicable rate or rates payable on the loan\ndetermined in accordance with the provisions of the policy, and (ii)\nsubject to subsection (e) of section three thousand two hundred six of\nthis article that when the total indebtedness on the policy, including\ninterest due or accrued, equals or exceeds the amount of the policy's\nloan value and if at least thirty days' prior notice shall have been\ngiven in the manner provided in section three thousand two hundred\neleven of this article, then the policy shall terminate and become void;\n  (H) any policy which provides for the crediting of additional amounts\npursuant to subsection (b) of section four thousand two hundred\nthirty-two of this chapter may also provide that if any indebtedness is\nowed to the insurer on any part of the loan value which would otherwise\nbe credited with additional amounts, such additional amounts may be\nreduced so that the total amounts credited on such part are so credited\nat a rate that is up to two percent per annum less than the applicable\nloan interest rate charged or at such other rate as the superintendent,\nupon the insurer's demonstrating justification therefor, may allow;\n  (I) this paragraph eight shall not apply to term insurance;\n  (J) this paragraph eight shall not apply to any policy qualified for\nspecial tax treatment under subsection (b) of section four hundred three\nof the Internal Revenue Code of 1986, as amended, to the extent such\napplication would prevent such qualification;\n  (9) a table showing the amounts of the applicable installment or\nannuity payments, if the policy proceeds are payable in installments or\nas an annuity;\n  (10) that the policy shall be reinstated at any time within three\nyears from the date of default, unless the cash surrender value has been\nexhausted or the period of extended insurance has expired, if the\npolicyholder makes application, provides evidence of insurability,\nincluding good health, satisfactory to the insurer, pays all overdue\npremiums with interest at a rate not exceeding six per centum per annum\ncompounded annually, and pays or reinstates any other policy\nindebtedness with interest at a rate not exceeding the applicable policy\nloan rate or rates determined in accordance with the policy's\nprovisions. This provision shall be required only if the policy provides\nfor termination or lapse in the event of a default in making a regularly\nscheduled premium payment;\n  (11) that upon surrender of the policy, together with a written\nrequest for cancellation, to the insurer during a period of not less\nthan ten days nor more than thirty days from the date the policy was\ndelivered to the policy owner, the insurer shall refund either (i) any\npremium paid for the policy, including any policy fees or other charges\nor (ii) if the policy provides for the adjustment of the cash surrender\nbenefit in accordance with a market-value adjustment formula and if the\npolicy or a notice attached to it so provides, the amount of the cash\nsurrender benefit provided under the policy as so adjusted assuming no\nsurrender charge plus the amount of all fees and other charges deducted\nfrom any premium paid or from the policy value; provided, however, that\na policy sold by mail order must contain a provision permitting the\npolicy owner a thirty day period for such surrender. A provision to this\neffect shall appear in the policy or in a notice attached to it;\n  (12) in any policy under which additional amounts may be credited\npursuant to subsection (b) of section four thousand two hundred\nthirty-two of this chapter, that states the guaranteed factors of\nmortality, expense and interest, and a statement of the method used by\nthe insurer in calculating actual policy values;\n  (13) in any policy under which additional amounts may be credited\npursuant to subsection (b) of section four thousand two hundred\nthirty-two of this chapter, that such additional amounts shall be\nnonforfeitable after the effective date of their crediting except for\nany charges imposed under the policy which are not greater than those\nallowed under subsection (n-1) or any market value adjustment made\npursuant to subsection (n-2) of section four thousand two hundred\ntwenty-one of this chapter; and\n  (14) in any policy under which additional amounts may be credited for\nany period pursuant to subsection (b) of section four thousand two\nhundred thirty-two of this chapter, that the policy shall state the\nfrequency at which additional amounts are credited, which shall be no\nless frequently than annually, except that policies that credit\nadditional amounts in an equity index account may do so in such account\nno less frequently than every three years;\n  (15) that states on the policy data or policy specifications page of a\nparticipating cash value policy that dividends are not guaranteed and\nthe insurer has the right to change the amount of dividend to be\ncredited to the policy which may result in lower dividend cash values\nthan were illustrated, or, if applicable, require more premiums to be\npaid than were illustrated.\n  (16) that states on the policy data or policy specifications page of a\nlife insurance policy subject to subsection (b) of section four thousand\ntwo hundred thirty-two of this chapter, to the extent applicable, that\nadditional amounts are not guaranteed and the insurer has the right to\nchange the amount of interest credited to the policy and the amount of\ncost of insurance or other expense charges deducted under the policy\nwhich may require more premium to be paid than was illustrated or the\ncash values may be less than those illustrated.\n  (17) that states on the policy data or policy specification page the\nminimum guarantee interest rate used to determine the guaranteed policy\nvalues.\n  (b) (1) A life insurance policy delivered or issued for delivery in\nthis state may exclude or restrict liability in the event of death\noccurring while the insured is resident in a specified foreign country\nor countries, but shall not contain any provision excluding or\nrestricting liability in the event of death caused in a certain\nspecified manner, except as a result of:\n  (A) conditions specified in subsection (c) hereof, subject to the\nterms of such subsection;\n  (B) suicide within two years from the date of issue of the policy;\n  (C) aviation under conditions specified in the policy;\n  (D) hazardous occupations specified in the policy, provided death\noccurs within two years from the date of issue of the policy.\n  (2) The superintendent may approve provisions that vary from\nsubparagraphs (A) through (D) of paragraph one hereof and subsection (c)\nhereof, whenever he deems such substitute provisions to be substantially\nthe same or more favorable to policyholders.\n  (3) If a death occurs that is subject to an exclusion or restriction\npursuant to this subsection or subsection (c) hereof, the insurer shall\npay the reserve on the face amount of the policy, computed according to\nthe mortality table and interest rate specified in the policy, together\nwith the reserve for any paid-up additions thereto, and any dividends\nstanding to the credit of the policy, less any indebtedness to the\ninsurer on the policy, including interest due or accrued; provided that\nif the policy shall have been in force for not more than two years, the\ninsurer shall pay the amount of the gross premiums charged on the policy\nless dividends paid in cash or used in the payment of premiums thereon\nand less any indebtedness to the insurer on the policy, including\ninterest due or accrued.\n  (c) (1) A life insurance policy delivered or issued for delivery in\nthis state may contain provisions excluding or restricting liability in\nthe event of death as a result of:\n  (A) war or an act of war, if the cause of death occurs while the\ninsured is serving in any armed forces or attached civilian unit and\ndeath occurs no later than six months after the termination of such\nservice;\n  (B) the special hazards incident to service in any armed forces or\nattached civilian unit, if the cause of death occurs during the period\nof such service while the insured is outside the home area, and if death\noccurs outside the home area or within six months after the insured's\nreturn to the home area while in such service or within six months after\nthe termination of such service, whichever is earlier;\n  (C) war or an act of war, within two years from the date of issue of\nthe policy, if the cause of death occurs while the insured is outside\nthe home area but is not serving in any armed forces or attached\ncivilian unit, and death occurs outside the home area or within six\nmonths after the insured's return to the home area.\n  (2) The superintendent may, by regulation, prescribe reasonable\nconditions relating to the use of provisions permitted by paragraph one\nhereof. The provisions of subsection (b) hereof shall apply to any\npolicy containing any provision permitted by this subsection.\n  (3) As used in this subsection, the term:\n  (A) "armed forces" means the military, naval, or air forces of any\ncountry, international organization, or combination of countries;\n  (B) "attached civilian unit" means a civilian non-combatant unit\nserving with any armed forces;\n  (C) "home area" means the fifty states of the United States, the\nDistrict of Columbia, and Canada;\n  (D) "war" includes any war declared or undeclared, and armed\naggression resisted by any armed forces;\n  (E) "act of war" means any act peculiar to military, naval, or air\noperations in time of war; and\n  (F) "special hazards incident to service", includes those hazards\nresulting in the insured's death being presumed by reason of being\nmissing, in action, or otherwise, or the insured's death from disease or\ninjury, accidental or otherwise, to which a person serving in, or with,\nany armed forces or attached civilian units is exposed in the line of\nduty.\n  (4) In permitting war exclusions, it is the legislative intent that\nsuch exclusions are not to be construed or interpreted as exclusions\nbecause of the status of the insured as a member of any armed forces or\nattached civilian units, or because of the presence of the insured as a\ncivilian in a combat area or area adjacent thereto. Such permissible\nexclusions shall be construed and interpreted according to the fair\nimport of their terms so as not to exclude deaths due to diseases or\naccidents which are common to the civilian population and are not\nattributable to special hazards to which a person serving in such forces\nor units is exposed in the line of duty.\n  (5) Any such war exclusion shall terminate six months after the end of\nthe war in which the insured was engaged or the war which the insured\nwas likely to engage in at the time of application for this policy,\nafter the discharge, release or separation of the insured from active\nmilitary service, after the demobilization of the insured, or after the\ninsured permanently leaves the war area, whichever occurs first. The end\nof war shall be determined by an order of the president of the United\nStates or by federal law or shall be deemed to occur on the effective\ndate of an agreement or declaration to end all hostilities which has\nbeen adopted or accepted by all armed forces involved therein, or in the\nabsence of such an agreement or declaration at the end of ninety\ncontinuous days from the end of all hostilities.\n  (d) (1) Subsections (b) and (c) hereof shall not apply to any\nprovision in a life insurance policy for additional benefits in the\nevent of accidental death.\n  (2) If a policy provides that the death benefit may be increased or\nother policy provisions changed upon the application of the policyholder\nand the production of evidence of insurability, the policy may also\nprovide that the two-year exclusions permitted under subparagraph (B) or\n(D) of paragraph one of subsection (b) hereof or subparagraph (C) of\nparagraph one of subsection (c) hereof shall run from the date of issue\nof the policy except that it shall run from the effective date of each\nsubsequent increase or change with respect to each such increase or\nchange.\n  (e) For policies that credit additional amounts in an equity index\naccount less frequently than annually: (1) if the policy holder requests\na full surrender of a policy prior to the expiration of the equity index\ncrediting period, the insurer shall provide a statement to the\npolicyholder, prior to processing the surrender, to the effect that: (A)\nno additional interest based on the equity index will be credited, since\nthe equity index crediting period has not yet expired, and that only the\nguaranteed interest will be credited to the account; and (B) the\npolicyholder is advised to consider alternatives to a full surrender of\nthe policy prior to the crediting of additional interest based on the\nequity index, such as a policy loan or, if available, a partial\nwithdrawal of the policy; (2) in determining the additional amount to be\ncredited to the policy in accordance with an equity index, the insurer\nshall include, in the calculation of the credit, any amounts withdrawn,\nincluding for policy loans, from the equity index account for the period\nof time prior to their withdrawal; (3) the policy shall include an\noption that credits additional amounts at least annually; and (4) the\npolicy may provide that the amounts to be paid upon the exercise of a\npolicy loan may be secured by the value of the policy's equity index\naccount or by the general account of the insurer.\n  (f) Any of the provisions of this section, or portions thereof,\nexclusive of paragraph eleven of subsection (a) of this section, that do\nnot apply to a single premium, nonparticipating, or term policy, shall\nto that extent not be incorporated in such policy. This section shall\nnot apply to group life insurance.\n