California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 12.2 - Standard Supplemental Disclosure Forms for Disability Insurance › Section 2540.4 - Disclosure Forms for Use with Policies: Drafting Instructions

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
Disclosure forms for use with policies shall be drafted in
					 accordance with the following subsections, which refer to the paragraphs
					 identified by bracketed numbers in the prototype disclosure forms set forth in
					 Section 2540.5. Text in parentheses in the
					 prototype forms may be varied as specified, except that the word "policy" may
					 be replaced by an appropriate term such as "benefit agreement" where coverage
					 is provided by a non-profit hospital service plan. Bracketed text in the
					 prototype forms is instructional and need not appear in the forms as
					 issued.
(a) Drafting Instructions for
				  Paragraph [1]. The insurer's name may be substituted for the phrase, "your
				  insurance company." This paragraph may be omitted from disclosure forms used
				  with or incorporated into advertisements.
(b) Drafting Instructions for Paragraphs [2].
				  Each benefit enumerated in the prototype description of the category of
				  coverage shall be stated, regardless of whether the policy with which the
				  disclosure form is to be used provides that benefit. Unless provided otherwise,
				  this paragraph may be omitted if the optional text appearing in parentheses in
				  Paragraph [4] is used in that paragraph. This paragraph may also be omitted if
				  no such optional text appears in Paragraph [4] of the appropriate prototype
				  form.
(c) Drafting Instructions for
				  Paragraph [3]. This paragraph shall set forth, in the order prescribed, a brief
specific
description of the benefits, including dollar amounts
				  and number of days duration where applicable, provided by the policy with which
				  the disclosure form is to be used. The description shall be stated clearly and
				  concisely and shall include a description of any elimination periods,
				  deductible amounts or co-payment requirements applicable to the benefits
				  described. Where a benefit enumerated in this paragraph is not provided by the
				  policy, it shall be listed with a notation to the effect that no coverage is
				  provided therefor. Where the policy information required to be disclosed in
				  this paragraph is variable at the option of the applicant, a disclosure form
				  used with or incorporated into an advertisement may set forth the ranges over
				  which such information may vary.
(d) Drafting Instructions for Paragraph [4].
				  This paragraph shall set forth a description of any policy provisions which
				  exclude, eliminate, restrict, reduce, limit or in any other manner operate to
				  reduce or deny payment of the benefits described in Paragraph [3]. Limitations
				  on coverage for pre-existing conditions and any Uniform Policy Provisions which
				  may have the effect of reducing or denying payment of benefits shall be briefly
				  described in this paragraph. Provisions which may have the effect of reducing
				  benefits otherwise payable because of other coverage shall be briefly described
				  in this paragraph. Where Paragraph [2] is omitted, the optional text, if any,
				  appearing in parentheses in this paragraph shall be used in this
				  paragraph.
(e) Drafting
				  Instructions for Paragraph [5]. A description of policy provisions respecting
				  renewability or continuation of coverage shall appear in this paragraph. Where
				  coverage is provided by a non-profit hospital service plan, an appropriate
				  phrase, such as "term of coverage," many be substituted for the word
				  "renewability."
(f) Drafting
				  Instructions for Paragraph [6]. The total premium payable by the insured for
				  the coverage shall be stated in this paragraph. The mode of payment for the
				  premium specified shall be prominently disclosed in conjunction with the
				  premium. Initial policy fees may be stated separately, but recurring policy
				  fees must be included within the total premium. If premiums are "step-rated,"
				  the premium for each step may be disclosed or the initial premium may be
				  disclosed, accompanied by a statement to the effect of, "Renewal premiums for
				  this policy will increase periodically depending upon (your age) (the policy
				  year). Refer to the policy schedule for details." Unless a policy is issued
				  with guaranteed premium rates, this paragraph must contain the statement,
				  "Premiums are subject to change." Where coverage is provided by a non-profit
				  hospital service plan, an appropriate phrase, such as "subscription charge,"
				  may be substituted for the word, "premium." Disclosure forms used with or
				  incorporated into advertisements may refer to accompanying rate schedules in
				  lieu of setting forth such schedules.
1. Amendment
					 filed 1-8-76; effective thirtieth day thereafter (Register 76, No.
					 2).
2. Amendment of subsection (b) filed 4-5-78; designated
					 effective 1-1-79 (Register 78, No. 14).
Note: Authority cited: Sections
						10293(a)
						and
						10608,
						Insurance Code.