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California Code, Insurance Code - INS § 10235.40

Current as of January 01, 2023 | Updated by FindLaw Staff

(a) An individual long-term care policy or certificate shall not be issued until the applicant has been given the right to designate at least one individual, in addition to the applicant, to receive notice of lapse or termination of a policy or certificate for nonpayment of premium. The insurer shall receive from each applicant one of the following:

(1) A written designation listing the name, address, and telephone number of at least one individual, in addition to the applicant, who is to receive notice of lapse or termination of the policy or certificate for nonpayment of premium.

(2) A waiver signed and dated by the applicant electing not to designate additional persons to receive notice. The required waiver shall read as follows:

“Protection Against Unintended Lapse.

I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this long-term care insurance policy for nonpayment of premium. I understand that notice will not be given until 30 days after a premium is due and unpaid. I elect not to designate any person to receive the notice.

_____________________________________________________________________

___________________________

Signature of Applicant

Date”

(b) The insurer shall notify the insured of the right to change the written designation, no less often than once every two years.

(c) If the policyholder or certificate holder pays the premium for a long-term care insurance policy or certificate through a payroll or pension deduction plan, the requirements contained in subdivision (a) need not be met until 60 days after the policyholder or certificate holder is no longer on that deduction payment plan. The application or enrollment form for a certified long-term care insurance policy or certificate shall clearly indicate the deduction payment plan selected by the applicant.

(d) An individual long-term care policy or certificate shall not lapse or be terminated for nonpayment of premium unless the insurer, at least 30 days before the effective date of the lapse or termination, gives notice to the insured and to the individual or individuals designated pursuant to subdivision (a), at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first-class United States mail, postage prepaid, not less than 30 days after a premium is due and unpaid.

(e) A long-term care insurance policy or certificate shall include a provision that, in the event of lapse, provides for reinstatement of coverage, if the insurer is provided with proof of the insured's cognitive impairment or the loss of functional capacity. This option shall be available to the insured if requested within five months after termination and shall allow for the collection of a past due premium, if appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy certificate.

(f) If a universal life insurance policy includes coverage for long-term care and may lapse due to insufficient account value even if all scheduled premiums are paid on time and no loans or withdrawals are taken, then an applicant shall receive the disclosure below or a substantially similar disclosure that contains all of the information below. The disclosure shall be submitted to the commissioner for approval. The disclosure shall be signed and dated by the applicant and the agent. One copy of the disclosure shall be retained by the applicant and an additional copy shall be retained by the insurer. The disclosure shall be in the following form:

“Disclosure of Risk of Lapse and Offer of Protection Against Lapse

APPLICANT: Please review and check the appropriate line(s), and sign and date below.

My agent has explained to me that the universal life insurance policy I am applying for may lapse (terminate) due to insufficient account value, even if I pay all the scheduled premiums on time and take no loans or withdrawals, and that if my life insurance policy lapses then I will also lose my long-term care coverage.

____

I have been offered a benefit that would guarantee the policy against lapse if I pay all required premiums on time, take no loans or withdrawals, and comply with other policy provisions. I have reviewed this offer.

____

I have been offered a policy that includes long-term care coverage and is guaranteed against lapse if I pay all required premiums on time, take no loans or withdrawals, and comply with other policy provisions. I have reviewed this proposal.

____

I have been informed by my agent that other insurers offer policies that include long-term care coverage and that would be guaranteed against lapse if I pay all required premiums on time and take no loans or withdrawals. However, the insurer of the policy that I am applying for does not. I understand that I will have to apply for insurance with a different insurance company if I would like to purchase a policy that includes long-term care coverage with this kind of lapse protection.

____________________________________________

_______________

Signature of applicant

Date

AGENT: Please review and check the appropriate line(s), and sign and date below.

I have explained to the applicant that the universal life insurance policy the applicant is applying for may lapse due to insufficient account value, even if all scheduled premiums are paid on time and no loans or withdrawals are taken, and that if the life insurance policy lapses then the long-term care coverage will also be lost.

____

I offered the applicant, and the applicant has reviewed, the following option(s) [check all that apply]:

____

An optional no-lapse guarantee benefit. I have explained that a no-lapse guarantee benefit would guarantee the policy against lapse if all required premiums are paid on time and no loans or withdrawals are taken.

____

A different universal life policy that includes long-term care coverage and is offered with a no-lapse guarantee benefit. I have explained that a no-lapse guarantee benefit would guarantee the policy against lapse if all required premiums are paid on time and no loans or withdrawals are taken.

____

A whole life policy that includes long-term care coverage. I have explained that a whole life policy is guaranteed against lapse if all required premiums are paid on time.

____

A stand-alone long-term care policy. I have explained that a stand-alone long-term care policy is guaranteed against lapse if all required premiums are paid on time.

____

I have explained that the applicant will have to apply for insurance with a different insurance company if the applicant would like to purchase a policy that includes long-term care coverage and would be guaranteed against lapse if all required premiums are paid on time and no loans or withdrawals are taken.

____________________________________________

_______________

Signature of agent

Date”
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Cite this article: FindLaw.com - California Code, Insurance Code - INS § 10235.40 - last updated January 01, 2023 | https://codes.findlaw.com/ca/insurance-code/ins-sect-10235-40/

Read this complete California Code, Insurance Code - INS § 10235.40 on Westlaw

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