Relates to accelerated death benefits under a life insurance policy and the right of the policy owner or certificate holder to rescind the request for such payments at any time during the process of application for said benefits.
TITLE OF BILL: An act to amend the insurance law, in relation to accelerated death benefits under a life insurance policy
PURPOSE: This bill would amend subsection (c) of section 3230 of the insurance law relating to the timing of the payment of an accelerated death benefit by a life insurer.
SUMMARY OF PROVISIONS: Currently, § 3230(c) of the insurance law prohibits life insurers from paying a policyholder an accelerated death benefit until a period of fourteen days after they have applied for receipt of such benefit and been provided the disclosure and illustration required pursuant to the section. This legislation deletes that requirement so that the accelerated death benefit applied for by the policyholder may be paid out in a more timely manner by the life insurer.
JUSTIFICATION: Section 3230 of the insurance law establishes the rules that life insurers must follow when a policyholder applies for an accelerated death benefit under a life insurance policy. Life insurance policies that contain an accelerated death benefit provision authorize the policyholder to apply to receive some portion of their life insurance death benefit before they are deceased. Policies that provide this option to policyholders are authorized to provide the accelerated death benefit if the policyholder is determined to be terminally, catastrophically or chronically (requiring long term care services) ill, as such terms are described pursuant to § 1113(a)(1)(A)-(D) of the insurance law. Section 3230(c) of the insurance law requires that life insurers must suspend payment of the accelerated death benefit for a period of 14 days after the policyholder has applied to receive such benefit and after the disclosure required has been provided to them.
This law was enacted over two decades ago and, since that time, experience has shown that policyholders rarely decline or reverse payment of the accelerated death benefit after they have applied for the benefit. To the contrary, policyholders have complained that they must wait for the two week period to expire before they can receive payment of the death benefit for which they had applied. All of the people applying for this benefit are experiencing extreme difficulties with their health status, either having been diagnosed with a terminal illness (life expectancy of twelve months or less), a medical condition requiring extraordinary medical care or receiving qualified long term care services. They are often in need of the death benefit payment as quickly as possible and are frequently displeased that they must wait for the payment due to the requirements of the law.
This bill removes the requirement that a life insurer must wait 14 days before payment of an accelerated death benefit and facilitates more immediate payment to policyholders when they are most in need of that payment.
LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 6507 IN SENATE January 31, 2014 ___________Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance AN ACT to amend the insurance law, in relation to accelerated death benefits under a life insurance policy THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subsection (c) of section 3230 of the insurance law, as added by chapter 428 of the laws of 1991, is amended to read as follows: (c)
[Insurers are prohibited from paying accelerated death benefits or special surrender values to the policy owner or certificate holder for a period of fourteen days from the date on which the information specified in subdivision (d) of this section is transmitted in writing to the policy owner or certificate holder.]The policy owner or certificate holder shall have the right to rescind the request for such payments at any time during the process of application for said benefits. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD13611-01-4