NY Ins L § 4220 (2021)
2021 New York Laws ISC - Insurance Article 42 - Life Insurance Companies and Accident and Health Insurance Companies and Legal Services Insurance Companies 4220 - Life Insurance and Annuities; Nonforfeiture Benefits Under Defaulted Contracts.

§  4220.  Life  insurance  and annuities; nonforfeiture benefits under defaulted contracts. (a) (1) This section  shall  apply  only  to  those policies  and  contracts issued prior to the operative date specified in section four thousand two hundred twenty-one of this article.  (2) Except as otherwise provided in this  chapter,  in  the  event  of default  in  payment  of a premium or a note therefor or any interest on such note, after three full years' premiums have been paid on  a  policy of  life  insurance  issued  by a domestic insurance company on or after January first, nineteen hundred forty, such company, upon  surrender  of such  policy  within the period of three months from the due date of the payment in default, shall pay to the  person  entitled  thereto  a  cash surrender  value  not  less than the excess, if any, of subparagraph (A) over subparagraph (B) as follows:  (A) The reserve on the policy at  the  due  date  of  the  premium  in default  (including  the  reserve  for any paid-up additions thereto and excluding the reserve for any additional benefits in the event of  death by  accident  or  for  benefits  in  the  event  of  total and permanent disability or for any continuous instalment payments to the  beneficiary or  to  the insured and the beneficiary incidental to the life insurance benefit), determined on the  basis,  in  accordance  with  section  four thousand two hundred seventeen of this article, specified in the policy, and in addition to such reserve, the amount of any dividends standing to the credit of the policy;  (B)  the  sum  of  any  indebtedness  to  the  company  on the policy, including interest due or accrued, and a surrender charge equal  to  two and  one-half  per  centum  of the face amount of such policy and of any paid-up additions thereto, and if the policy be surrendered  within  the period  above specified and after the expiration of the grace period, if any, following the due date of the payment in default, then there may be added to the sum to be deducted the value of any extended term insurance granted (determined as hereinafter specified) during the period  between the  expiration  of  the  grace  period and the date of surrender of the policy.  (3) The person entitled to such cash surrender value may, upon  demand therefor  within  three  months  after  the  due  date of the payment in default, elect to receive in lieu of such cash  surrender  value  either extended  term  insurance (including pure endowment benefits, if any) or reduced paid-up insurance under the policy, for a term, in the  case  of extended  term  insurance,  and  for  an  amount, in the case of reduced paid-up insurance, which, in either case, shall be not  less  than  that provided by applying such cash surrender value at the date of default to provide  such  extended term or paid-up insurance, computed at net rates at the attained insurance age of the insured and on the same basis  used for  the  computation  of  such cash surrender value, except that in the case of policies issued on a substandard basis or policies for which the reserves are computed upon the American Men Ultimate Table of Mortality, the term of such extended  insurance  may  be  computed  upon  rates  of mortality  not greater than one hundred thirty per centum of those shown by the table specified in the policy for the computation of the reserve. The period of extended term insurance shall date from the  due  date  of the premium in default. Reduced paid-up insurance shall be participating if the policy be participating.  (4)  The  amount of the extended term insurance shall be not less than the amount of life insurance under the policy as expressed in the policy with the approval of the superintendent (including any paid-up additions thereto and excluding any additional benefits on  account  of  death  by accident  or any continuous instalment payments to the beneficiary or to the insured  and  the  beneficiary  incidental  to  the  life  insurance  benefit),  decreased by the amount of any indebtedness to the company on the policy, including interest due  or  accrued.  In  the  case  of  any endowment  life  insurance  policy,  if the sum used to provide extended term  insurance  shall be more than sufficient to continue the insurance to the end of the endowment period, the excess shall be used to  provide a pure endowment benefit at the end of the endowment period.  (5)  Extended term insurance and reduced paid-up insurance may exclude additional benefits in the event of death by accident  and  benefits  in the event of total and permanent disability, and extended term insurance may be without participation in surplus and without the right to loans.  (6)  If no other option expressed in the policy be so selected by such person within three months after the due date of the premium in default, the amount of such nonforfeiture value shall be applied to continue  the insurance  in  force  from  the  due  date  of the premium in default as extended term insurance as hereinbefore provided.  (7) The policy shall specify the reserve  basis  used  in  determining nonforfeiture benefits and cash surrender values.  (8) This subsection shall not apply to any pure endowment, annuity, or reversionary annuity contract, nor to any term insurance of thirty years or less.  (9)  In  the  case  of  ordinary or industrial life insurance policies issued on a substandard basis the  company  shall  not  be  required  to provide extended term insurance as a nonforfeiture benefit.  (10) That the company must provide, to any policyowner who so requests in  writing,  within  twenty  business  days  from  the date the written request is received by the company, a statement of  the  cash  surrender value of the policy.  (b)  (1)  Every  contract issued after January first, nineteen hundred forty, by any domestic life  insurance  company  which  provides  for  a deferred  annuity on the life of the insured or of the annuitant, or for a pure endowment contract, except  a  contract  paid  for  by  a  single premium,  shall  provide that if the contract after having been in force for three full years, shall by  its  terms  lapse  or  become  defaulted because  any stipulated payment to the company shall not have been made, the reserve on such contract, computed according to the standard adopted by such company pursuant to section four thousand two hundred  seventeen of this article, shall, after deducting a surrender charge not to exceed the  limits hereinafter specified, and after deducting the amount of the unpaid balance, including interest due or accrued, on any loans on  such contract by the company, be applied as a net single premium according to such  standard,  for the purchase of a paid-up annuity or pure endowment contract, which shall be payable by the company under the same terms and conditions, except as to amount, as the original contract.  (2) The surrender charge to be  deducted  pursuant  to  paragraph  one hereof shall not exceed the greater of the following amounts:  (A)  thirty-five  percent  of  the  gross  annual  stipulated  payment required by the holder of such contract by the terms thereof; or  (B) twenty-five dollars per one hundred dollars a year income provided by the contract at the normal retirement age.  (3) If such contract provides for a cash surrender value at the option of the holder of such contract and in lieu of such  paid-up  annuity  or pure endowment contract, such cash surrender value shall be an amount at least  equal  to  such  net  single  premium and shall be payable to the holder of such contract upon demand therefor and the surrender  of  such contract within ninety days after the date of lapse or default.  (4)  The paid-up annuity or pure endowment contract prescribed by this section shall not include additional benefits in the event of accidental death or benefits in the event of total and permanent disability and, at  the option of the  insurer,  may  be  without  future  participation  in surplus and without the right to loans.  (c) The company may provide in any policy or contract that the payment of any cash surrender value may be deferred for not exceeding six months after  demand  therefor  with  surrender  of  the  policy or contract as provided above, and the amount payable shall bear  interest  during  any such deferred period of thirty days or more at the rate specified in the policy for the computation of the reserve.  (d) The surrender value and other nonforfeiture benefits of any lapsed or  defaulted policy of life insurance or annuity contract issued by any domestic life insurance company before January first,  nineteen  hundred forty  shall  be determined in accordance with the law applicable at the date of issuance of such policy or contract.  (e) No foreign or alien life insurance company shall deliver or  issue for  delivery  in this state any policy of life insurance or any annuity or pure  endowment  contract  which  does  not  contain  the  provisions required  by  subsection  (a)  or  (b)  hereof,  as  the case may be, or provisions which, in the opinion of the  superintendent,  are  at  least equally favorable to policyholders.