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.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9154A
SPONSOR: Cymbrowitz 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 bene-
fit 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
five 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 acceler-
ated 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 insur-
ers 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 policyhold-
er to apply to receive some portion of their life insurance death bene-
fit before they are deceased. Policies that provide this option to poli-
cyholders are authorized to provide the accelerated death benefit if the
policyholder is determined to be terminally, catastrophically or chron-
ically (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 5 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, experi-
ence 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 5 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.
