2023 New York Laws › ISC - Insurance › Article 45 - Fraternal Benefit Societies › 4510 - Life Insurance Certificates; Required and Prohibited Provisions.

§   4510.   Life   insurance  certificates;  required  and  prohibited
provisions.  (a) No certificate or other evidence of  a  life  insurance
contract  shall be delivered or issued for delivery in this state by any
authorized  society  unless  it  contains  in  substance  the  following
provisions, or provisions which in the opinion of the superintendent are
more  favorable  to  the insured members, except that such provisions as
are not applicable to single premium or term  life  insurance  shall  to
that extent not be incorporated in such certificate or contract:
(1) For certificates in which the amount and frequency of premiums may
vary,  a provision that, after payment of the first premium, the insured
is entitled to a grace period of not less than sixty-one days, beginning
on the day when  the  fraternal  benefit  society  determines  that  the
certificate's  net cash surrender value is insufficient to pay the total
charges necessary to keep the certificate in force for  one  month  from
that  day  within  which to pay sufficient premium to keep the policy in
force for three months from the date the insufficiency  was  determined.
During  such  grace period the certificate shall continue in full force,
but in case the certificate  becomes  a  claim,  on  account  of  death,
maturity  or  other  benefit  accrued during such grace period before an
amount of premium sufficient to keep the certificate in force  is  paid,
an  amount  of  premium sufficient to keep the policy in force until the
day the certificate became a claim  may  be  deducted  from  any  amount
payable   in  any  settlement  under  the  certificate.  For  all  other
certificates, a provision that the insured is entitled to a grace period
of not less than one month or thirty days within which  the  payment  of
any  premium  after  the  first  may be made, and that during such grace
period the certificate shall continue in full force,  but  in  case  the
certificate  becomes  a  claim,  on  account of death, maturity or other
benefit accrued during such grace period before the overdue premiums are
paid, the amount of such premium or premiums may be  deducted  from  any
amount payable in any settlement under the certificate.
(2)  A  provision that the certificate shall be incontestable after it
has been in force during the lifetime of the insured member for a period
of two years from its date of issue, and, if a certificate provides that
the death benefit provided by the certificate may be increased, or other
certificate provisions changed, upon the application of the  certificate
holder  and the production of evidence of insurability, a provision that
the certificate with respect to each such increase or  change  shall  be
incontestable  after  two years from the effective date of such increase
or change, except in each case for (i) non-payment of premiums, and (ii)
violation of the provisions of the certificate relating to  military  or
naval  service,  and,  at  the  option  of the society, (iii) provisions
relating to benefits in the event of total and permanent disability, and
(iv) provisions  which  grant  additional  insurance  against  death  by
accident or accidental means.
(3)  A  provision  that  if it shall be found at any time before final
settlement under the certificate that the age of the insured (or the age
of the beneficiary, if considered in determining the premium)  has  been
misstated, and the discrepancy and the premium payment involved have not
been adjusted, the amount payable under the certificate shall be such as
the  premium would have purchased at the correct age, except that if the
correct age was not  an  insurable  age  under  the  society's  charter,
constitution  or  by-laws,  and such charter, constitution or by-laws so
provide, only  the  net  mortuary  payments  made  thereunder  shall  be
returned  or, at the option of the society, the amount payable under the
certificate shall be such as the premium would  have  purchased  at  the
correct  age  according  to  the  society's  promulgated  rates  and any
extension thereof based on actuarial principles.
(4) A provision that the holder of a certificate shall be entitled  to
have  the certificate reinstated at any time within three years from the
due date of the premium in default, unless the cash value has been  duly
paid  or  the  period  of  extended  insurance  has  expired,  upon  the
production  of  evidence of insurability and good health satisfactory to
the society and the payment  of  all  overdue  premiums  and  any  other
indebtedness to the society upon such certificate together with interest
on  such premiums, at a rate not exceeding six percent per annum payable
annually and interest on such  indebtedness  at  a  rate  or  rates  not
exceeding  the  applicable  loan  rate or rates determined in accordance
with the certificate's provisions. Such provision shall be required only
if the certificate provides for termination or lapse in the event  of  a
default in making a regularly scheduled premium. Such provision may give
the  society  the  right  to  contest  the reinstated certificate, as to
statements made to procure reinstatement, within a period after date  of
reinstatement  not  exceeding the period of contestability prescribed in
the original certificate with the same exceptions permitted by paragraph
two hereof.
(5) In the case of certificates which cause on a basis  guaranteed  in
the  certificate  unscheduled  changes in benefits or premiums, or which
provide an option for changes in  benefits  or  premiums  other  than  a
change to a new certificate, a provision specifying the mortality table,
interest  rate  and method used in calculating cash surrender values and
the paid-up nonforfeiture benefits available under the  certificate.  In
the   case  of  all  other  certificates,  a  provision  specifying  the
nonforfeiture options available under the certificate in  the  event  of
default  in  a  premium  payment  after  premiums  have  been paid for a
specified period, together with a table showing, in figures, the options
so available, and also the loan values, if any, available during each of
the first twenty years after  the  issuance  of  the  certificate.  Such
options  shall  conform  with  the requirements of section four thousand
five hundred eleven of this article.
(6) A provision for certificates issued on and  after  January  first,
nineteen  hundred  seventy-five,  that  after three full years' premiums
have been paid or, in the case of certificates  that  provide  that  the
certificate  holder  may vary the amount and frequency of premiums to be
paid  to  the  society,  after  three  years  from  the  issue  of   the
certificate,  if  the  certificate  is  in force and not in default, the
society will, at any time while the certificate is in force, advance, on
proper assignment or pledge of the certificate and on the sole  security
thereof,  a  sum  equal  to,  or  at  the  option of the person entitled
thereto, less than, the amount of the cash surrender value calculated in
accordance with the provisions of section  four  thousand  five  hundred
eleven  of  this article; and that the society may deduct from such loan
value (in addition to the  indebtedness  deducted  in  determining  such
value)  any  unpaid  balance  of the premium for the current certificate
year; and that if the loan is made or repaid on a date  other  than  the
anniversary  of the certificate the society may collect interest for the
portion of the current  certificate  year  on  a  pro  rata  basis.  The
certificate shall provide, at the option of the society, either that (i)
any  such  loan  shall  bear interest at a maximum rate of not more than
seven and four-tenths per centum per annum if payable in advance or  the
equivalent  effective rate of interest if otherwise payable, or (ii) any
such loan shall bear interest at a rate not in excess of  an  adjustable
maximum  rate  established from time to time by the society as permitted
by law.  If  the  certificate  provides  for  an  adjustable  rate,  the
certificate  shall  specify  the regular intervals at which the interest
rate is to be determined which shall  be  at  least  once  every  twelve

months, but not more frequently than once in any three month period. The
certificate  may further provide that if the interest on the loan is not
paid when due, it shall be added to the existing loan,  and  shall  bear
interest  at the applicable rate or rates payable on the loan determined
in accordance with the provisions of the  certificate;  and  subject  to
subsection (e) of section three thousand two hundred six of this chapter
may  further  provide  that  if  and  when the total indebtedness on the
certificate, including interest due or accrued, equals  or  exceeds  the
amount  of  the  loan value thereof at such time, and if at least thirty
days' prior notice shall have been  given  in  the  manner  provided  in
section  three  thousand  two  hundred  eleven of this chapter, then the
certificate shall terminate and become void. This  provision  shall  not
apply to term insurance.
Any certificate which provides for the crediting of additional amounts
pursuant  to section four thousand five hundred eighteen of this article
may also provide that if any indebtedness is owed to the society on  any
part of the loan value which would otherwise be credited with additional
amounts,  such  additional  amounts  may  be  reduced  so that the total
amounts credited on such part are so credited at a rate that  is  up  to
two  percent  per  annum  less  than  the  applicable loan interest rate
charged or at such other rate as the superintendent, upon the  society's
demonstrating justification therefor, may allow.
(7)   If   in   the  judgment  of  the  superintendent,  the  charter,
constitution or by-laws of the society provide that the violation of any
section or sections thereof shall result in the reduction or termination
of any benefit payable under the certificate,  then  a  provision  which
either:
(A) recites fully all such sections,
(B) sets forth the substance of all such sections, or
(C)  states  in substance that no section of the charter, constitution
or by-laws shall be relied upon or be used to reduce  or  terminate  any
benefit   payable   under   the   certificate  unless  such  section  is
specifically set forth or referred to in the certificate.
(8)  The  provision  in  the  constitution  or  by-laws  required   by
subsection  (g)  of  section  four  thousand  five  hundred four of this
article.
(9) A provision that in case the by-laws of the  society  provide  for
expulsion or suspension of a member, any member so expelled or suspended
except  for  non-payment  of  a  premium  or contribution, or within the
contestable period for material misrepresentations  in  his  application
for membership, shall have the privilege of maintaining his insurance in
force  by  continuing  payment  of  the required premium or contribution
payable under the certificates and of such other assessments as  may  be
required of members holding certificates of the same class.
(10) If issued for delivery in this state by any authorized foreign or
alien society, a provision that the rights or obligations of the insured
member  under  such certificate or other evidence of such life insurance
contract or of  any  person  rightfully  claiming  thereunder  shall  be
governed by the laws of this state.
(11)  A  provision  that  the  society  shall  annually  ascertain and
apportion any divisible surplus accruing on the certificate.
(12) In any certificate under which additional amounts may be credited
pursuant to section four thousand five hundred eighteen of this article,
provisions stating
(A) the guaranteed factors of mortality, expense and interest, and the
method used by the society in calculating actual certificate values;
(B) that such additional amount  shall  be  nonforfeitable  after  the
effective  date  of their crediting except for any charges imposed under

the  certificate  which  are  not  greater  than  those  allowed   under
subsection  (n-1)  or  any  market  value  adjustment  made  pursuant to
subsection (n-2) of section four thousand two hundred twenty-one of this
chapter; and
(C)  that the society shall credit any such amounts no less frequently
than annually during such period.
(13) Operative on January first, nineteen hundred eighty-five or  with
respect  to  certificates  issued by any particular society operative on
such earlier date as the society may have specified in a written  notice
filed  with  the  superintendent as the date the society elects to begin
compliance with the provisions of this paragraph, a provision  that  (i)
if  the  death  of the insured shall occur within a period for which the
premium has been paid, the society shall add to the certificate proceeds
a refund of the pro rata portion of premium paid for any  period  beyond
the  end of the certificate month in which death occurred, provided such
premium was not waived under any waiver of premiums benefit included  in
the  certificate  or  attached  thereto,  and  (ii)  if the death of the
insured shall occur within a period for which the premium has  not  been
paid,  but  within  the  grace  period  provided in the certificate, the
society may deduct from the certificate proceeds that portion of overdue
premium as applies to the  period  ending  with  the  last  day  of  the
certificate  month  in  which death occurred; provided however, that the
provisions of this paragraph shall not be applicable to  single  premium
certificates and paid-up certificates.
(b)  (1)  No  such  certificate  or other evidence of a life insurance
contract delivered or issued for delivery in this  state  shall  contain
any  exclusory  or  restrictive  provisions relating to liability in the
event of death caused in a certain specified manner except the following
provisions, or provisions which in the opinion of the superintendent are
substantially the same or more favorable to holders of such  certificate
or contracts, excluding or restricting coverage in the event of death:
(A)  as a result of war or an act of war, if the cause of death occurs
while the insured is serving in the military, naval or air forces of any
country, international organization or combination of  countries  or  in
any  civilian  noncombatant unit serving with such forces, provided such
death occurs while in such forces or units or within  six  months  after
termination of service in such forces or units;
(B)  as  a  result  of  the special hazards incident to service in the
military, naval or air forces of any country, international organization
or combination of  countries  or  in  any  civilian  non-combatant  unit
serving with such forces, if the cause of death occurs while the insured
is  serving  in  such  forces  or  units  and  is outside the home area,
provided such death occurs outside the home area or  within  six  months
after  the  insured's  return  to  the home area while in such forces or
units or within six months after the  termination  of  service  in  such
forces or units, whichever is earlier;
(C)  as  the result of war or an act of war, within two years from the
date of issue of the certificate, while  the  insured  is  not  in  such
forces  or  units,  if  the  cause  of death occurs while the insured is
outside the home area; provided such death occurs outside the home  area
or within six months after the insured's return to the home area;
(D)  as a result of suicide within two years from the date of issue of
the certificate;
(E) as  a  result  of  aviation  under  conditions  specified  in  the
certificate; or
(F)  within  two  years from the date of issue of the certificate as a
result of specified hazardous occupations, or while  the  insured  is  a
resident of a specified foreign country or countries.
(2) The provisions of this paragraph shall apply only to subparagraphs
(A), (B) and (C) of paragraph one hereof.
(A) As used in such subparagraphs, "home area" means the states of the
United  States, the District of Columbia and Canada; "war" includes, but
is not limited to, any war declared or undeclared, and armed  aggression
resisted   by  the  military,  naval  or  air  forces  of  any  country,
international organization or combination of  countries;  "act  of  war"
means  any act peculiar to military, naval, or air operations in time of
war; and "special hazards incident to  service"  includes,  but  is  not
limited  to,  those  hazards  resulting  in  the  insured's  death being
presumed by reason of being missing or  missing  in  action,  and  those
hazards  resulting  in  death  from  disease  or  injury,  accidental or
otherwise, to which a person serving in, or with, such forces  or  units
is exposed in the line of duty.
(B)  In  permitting  such  war exclusions it is the legislative intent
that  such  exclusions  are  not  to  be  construed  or  interpreted  as
exclusions  because  of  the  status  of the insured as a member of such
forces or units or because of the presence of the insured as a  civilian
in  a  combat area or area adjacent thereto. Such permissible exclusions
shall be construed and interpreted according to the fair import of their
terms so as not to exclude deaths due to diseases or accidents which are
common to the civilian population and are not  attributable  to  special
hazards  to which a person serving in such forces or units is exposed in
the line of duty.
(C)  The  superintendent  may,  by  regulation,  prescribe  reasonable
conditions relative to the use of such war exclusion provisions.
(3)  In  the  event of death as to which there is such an exclusion or
restriction, the society shall pay the reserve on the face amount of the
certificate, computed according to the mortality table and interest rate
specified in the certificate, together with the reserve for any  paid-up
additions  thereto,  and  any  dividends  standing  to the credit of the
certificate, less any indebtedness to the society  on  the  certificate,
including  interest  due  or  accrued;  provided that if the certificate
shall have been in force for not more than two years the  society  shall
pay  the  amount  of  the gross premiums charged on the certificate less
dividends paid in cash or used in the payment of  premiums  thereon  and
less  any  indebtedness  to  the  society  on the certificate; including
interest due or accrued.
(4) Nothing contained in this subsection shall apply to any  provision
in  a life insurance certificate for additional benefits in the event of
death by accident or by accidental means.
(5) If a certificate provides that the death benefit may be increased,
or other certificate provisions changed, upon  the  application  of  the
certificate  holder  and the production of evidence of insurability, the
certificate may also provide that  the  two  year  exclusions  permitted
under  subparagraph  (C), (D) or (F) of paragraph one of this subsection
shall run from the date of issue of the certificate except that it shall
run from the effective date of each subsequent increase or  change  with
respect to each such increase or change.
(c) No such certificate or other evidence of a life insurance contract
shall  be  issued  or  delivered  in  this  state  by any society if, in
substance, any of the following provisions are in any way made a part of
the contract:
(1) any provision limiting the time within which any action at law  or
in  equity may be commenced to less than eighteen months after the cause
of action shall accrue;
(2)  any  provision  for  forfeiture,  lapse  or  termination  of  any
certificate  because  of failure to repay any loan on the certificate or

to pay interest on such loan, while the total unpaid amount of any  loan
or  loans  under  such certificate, including interest, is less than the
loan value thereof; or
(3)  any  provision whereby the suspension or expulsion of the insured
member, or change of occupation, or any other violation of the terms and
conditions of the  insurance  contract  shall  result  in  the  loss  or
reduction  of  the  cash  surrender value or other withdrawal equity, if
any, available by the terms of such certificate.