THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY BISHOP, HARKINS, SIPTROTH, KOTIK, BELFANTI, McILVAINE SMITH, GINGRICH, JOHNSON AND BROWN, OCTOBER 4, 2010

REFERRED TO COMMITTEE ON INSURANCE, OCTOBER 4, 2010  

AN ACT

Amending the act of May 17, 1921 (P.L.682, No.284), entitled "An

act relating to insurance; amending, revising, and

consolidating the law providing for the incorporation of

insurance companies, and the regulation, supervision, and

protection of home and foreign insurance companies, Lloyds

associations, reciprocal and inter-insurance exchanges, and

fire insurance rating bureaus, and the regulation and

supervision of insurance carried by such companies,

associations, and exchanges, including insurance carried by

the State Workmen's Insurance Fund; providing penalties; and

repealing existing laws," further providing for uniform

policy provisions.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 410 of the act of May 17, 1921 (P.L.682,

No.284), known as The Insurance Company Law of 1921, amended

July 19, 2951 (P.L.1100, No.245), July 1, 1980 (P.L.336, No.84)

and April 8, 1982 (P.L.297, No.84), is amended to read:

Section 410.  Uniform Policy Provisions.--No policy of life

or endowment insurance, except policies of industrial insurance

where the premiums are payable monthly or oftener, shall

hereafter be delivered in this Commonwealth unless it contains,

in substance, the following provisions or provisions which, in

the opinion of the Insurance Commissioner, are more favorable to

the policyholder:--

(a)  A provision that all premiums shall be payable in

advance.

(b)  A provision that the insured is entitled to a grace,

either of thirty days or one month, within which the payment of

any premium after the first year may be made, subject, at the

option of the company, to an interest charge not in excess of

eight per centum per annum for the number of days of grace

elapsing before the payment of the premium, during which period

of grace the policy shall continue in full force; but in case

the policy becomes a claim during the said period of grace,

before the overdue premium, or the deferred premiums of the

current policy year, if any, are paid, the amount of such

premiums, with interest on any overdue premiums, may be deducted

in any settlement under the policy.

(c)  A provision that the policy shall be incontestable after

it has been in force, during the lifetime of the insured, two

years from its date of issue, except for nonpayment of premiums;

and that, at the option of the company, provisions relative to

disability benefits, and provisions which grant additional

insurance specifically against death by accident or accidental

means, may also be excepted.

(d)  A provision that the policy shall constitute the entire

contract between the parties; but if the company desires to make

the application a part of the contract, it may do so, provided a

copy of such application shall be endorsed upon or attached to

the policy when issued, and in such case the policy shall

contain a provision that the policy and the application therefor

shall constitute the entire contract between the parties.

(e)  A provision that, if the age of the insured or of any

other person whose age is considered in determining the premium

has been misstated, the amount payable or benefit accruing under

the policy shall be such as the premium would have purchased at

the correct age or ages.

(f)  A provision that the policy shall participate in the

surplus of the company, and that, beginning not later than the

end of the third policy-year, the company will annually

determine the portion of the divisible surplus accruing on the

policy, and that the party entitled to elect such option shall

have the right to have the dividend arising from such

participation paid in cash, or applied in accordance with any

one of such other dividend options as may be provided by the

policy. If any such other dividend options are provided, the

policy shall further state which option shall be automatically

effective, if such party shall not have elected some other

option.

In lieu of the foregoing provisions, the policy may contain a

provision that the policy shall participate in the surplus of

the company, and that, beginning not later than the end of the

fifth policy-year, the company will determine the portion of the

divisible surplus accruing on the policy, and that the party

entitled thereto shall have the right to have the current

dividend arising from such participation paid in cash, and that,

at periods of not more than five years thereafter, such

apportionment and payment, at the option of such party, shall be

had.

Renewable term policies of ten years or less may provide that

the surplus accruing to such policies shall be determined and

apportioned each year after the second policy-year, and

accumulated during each renewal period, and that at the end of

any renewal period, or renewal of the policy by the insured, the

company shall apply the accumulated surplus as an annuity for

the next succeeding renewal term in the reduction of premiums.

(g)  A provision specifying the options if any to which the

policyholder is entitled in the event of default in a premium

payment.

(h)  A provision for a loan value at any time after three

full years' premiums have been paid and while no premium is in

default beyond the grace period of payment.

(1)  In the case of any policy issued prior to the operative

date of section four hundred and ten A of this act (the Standard

Non-forfeiture Law), it shall be provided that the company will

advance, on proper assignment or pledge of the policy, and on

the sole security thereof, at a specified rate of interest, a

sum equal to, or, at the option of the owner of the policy, less

than, the reserve at the end of the current policy year on the

policy, and on any dividend additions thereto, less a sum not

more than two and one-half per centum of the amount insured by

the policy and of any dividend additions thereto; and that the

company will deduct from such loan value any existing

indebtedness on the policy, and any unpaid balance of the

premium for the current policy-year, and may collect interest in

advance on the loan to the end of the current policy-year; which

provision may further provide that such loan may be deferred for

not exceeding six months after the application therefor is made.

A company may, in lieu of the provision hereinabove permitted

for the deduction from a loan on the policy of a sum not more

than two and one-half per centum of the amount insured by the

policy and of any dividend additions thereto, insert in the

policy a provision that one-fifth of the entire reserve may be

deducted in case of a loan under the policy; or may provide

therein that the deduction may be the said two and one-half per

centum, or the one-fifth of the said entire reserve, at the

option of the company.

(2)  In the case of any policy issued on or after the

operative date of section four hundred and ten A of this act

(the Standard Nonforfeiture Law for Life Insurance), the loan

provision shall provide that the company will advance, on proper

assignment or pledge of the policy, and on the sole security

thereof, at a specified rate of interest not exceeding eight per

centum per annum for policies issued prior to the effective date

of section four hundred and ten F, a sum equal to, or, at the

option of the party entitled thereto, less than, the cash

surrender value at the end of the current policy year as

required by section four hundred and ten A of this act; and that

the company may deduct from such loan value (in addition to any

indebtedness deducted in determining such value) any unpaid

balance of the premium for the current policy year, and may

collect interest in advance on the loan to the end of the

current policy year. The company shall reserve the right to

defer such loan, except any made to pay premiums to the company,

for six months after application therefor is made. This

subsection (h) shall not apply to term insurance.

(i)  A provision for a non-forfeiture and cash surrender

value.

(1)  In the case of any policy issued prior to the operative

date of section four hundred and ten A of this act (the Standard

Non-forfeiture Law), a non-forfeiture benefit shall be provided

in event of default in premium payments after premiums shall

have been paid for three years, which shall secure to the owner

of the policy a stipulated form of insurance, the net value of

which shall be at least equal to the reserve at the date of

default on the policy and on any dividend additions thereto,

specifying the mortality table and rate of interest adopted for

computing such reserves, less a sum not more than two and one-

half per centum of the amount insured by the policy and of any

existing dividend additions thereto, and less any existing

indebtedness to the company on the policy. Such provision shall

stipulate that the policy may be surrendered to the company, at

its home office, within one month from date of default, for a

specified cash value at least equal to the sum which would

otherwise be available for the purchase of insurance as

aforesaid, and may stipulate that the company may defer payment

for not more than six (6) months after the application therefor

is made. This provision shall not be required in term insurance

of twenty years or less.

(2)  In the case of any policy issued on or after the

operative date of section four hundred and ten A of this act

(the Standard Non-forfeiture Law), a non-forfeiture benefit and

cash surrender value shall be provided in accordance with said

section.

(j)  A table showing in figures the loan value, if any, and

the options, if any, available under the policy, each year, upon

default in premium payments, during at least the first twenty

years of the policy; and if the proceeds of the policy are

payable in installments which are determinable prior to maturity

of the policy, a table showing the amount of the guaranteed

installments.

(k)  A provision that the holder of a policy shall be

entitled to have the policy reinstated, upon written application

therefor, at any time within three years from the date of

default in premium payments, unless the policy has been duly

surrendered or the extension period expired, upon the production

of evidence of insurability satisfactory to the company, and the

payment of all overdue premiums with interest at a rate to be

specified in the policy but not exceeding eight per centum per

annum, and the payment of any other indebtedness to the company

upon said policy with interest at a rate or rates determined in

accordance with section four hundred and ten F, compounded

annually.

(l)  A provision that when a policy shall become a claim by

the death of the insured, verification of the beneficiary shall

be concluded within forty-eight hours and settlement shall be

made upon receipt of due proof of death.

Any of the foregoing provisions, or parts thereof, not

applicable to single premium or non-participating policies,

shall, to that extent, not be incorporated therein: Provided,

however, That the policies of an insurance company organized

under the laws of any state or foreign government may contain,

when delivered in this Commonwealth, any provision which may be

prescribed by laws of the state or government under which the

company is organized; and the policies of a life insurance

company organized under the laws of this Commonwealth may, when

delivered in any other state, territory, or foreign country,

contain any provision required by the laws of such state,

territory, or foreign country to be contained in policies

delivered therein. A clause in any policy of life insurance

providing that such policy shall be incontestable after a

specified period shall preclude only a contest of the validity

of the policy and shall not preclude the assertion, at any time,

of defenses based upon provisions in the policy which exclude or

restrict coverage, whether or not such restrictions or

exclusions are excepted in such clause.

Section 2.  This act shall take effect in 60 days.