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Bill Number: 3315 Ratification Number: 346 Act Number 333 Introducing Body: House Subject: Life insurance coverage for residents written out of state
(A333, R346, H3315)
AN ACT TO AMEND SECTIONS 38-65-60, 38-65-70, 38-65-210, AND 38-65-310, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO GROUP LIFE INSURANCE, SO AS TO PROVIDE FOR CONTINUED COVERAGE DURING AN INSURED'S TOTAL DISABILITY AND DELIVERY OF CERTIFICATES OF INSURANCE TO COVERED DEBTORS, TO REQUIRE ADJUSTMENTS WHEN THE SEX OF AN INSURED IS MISSTATED, TO INCREASE THE LIMITATION ON THE AMOUNT WHICH THE INSURER MAY PAY TO PERSONS WHO INCUR EXPENSE BY REASON OF THE DEATH OF AN INSURED WITH NO NAMED BENEFICIARY FROM FIVE HUNDRED DOLLARS TO TWO THOUSAND DOLLARS AND THE LIMITATION ON THE AMOUNT OF INDIVIDUAL COVERAGE A MEMBER OF A GROUP WHOSE GROUP COVERAGE IS TERMINATED MAY RECEIVE FROM TWO THOUSAND DOLLARS TO TEN THOUSAND DOLLARS, TO ELIMINATE A RESTRICTION ON GROUPS WHICH MAY NOT BE INSURED BY OUT-OF-STATE INSURERS, TO FURTHER DEFINE THE DEPENDENT CHILDREN WHOSE LIVES MAY BE INSURED UNDER GROUP POLICIES AND INCREASE THE LIMIT OF COVERAGE FROM FIVE THOUSAND DOLLARS TO TEN THOUSAND DOLLARS, AND TO ELIMINATE A RESTRICTION ON THE AMOUNT OF LIFE INSURANCE COVERAGE A PERSON MAY RECEIVE UNDER A FRANCHISE OR WHOLESALE LIFE INSURANCE PLAN; TO AMEND THE 1976 CODE BY ADDING SECTION 38-65-110 SO AS TO PROVIDE FOR THE EXTENSION OF TIME FOR EXERCISING THE RIGHT OF OBTAINING LIFE INSURANCE WITHOUT EVIDENCE OF INSURABILITY WHEN NOTICE OF THE RIGHT HAS NOT BEEN GIVEN AS REQUIRED; AND TO REPEAL SECTION 38-65-80 RELATING TO INAPPLICABILITY OF CHAPTER 65 OF TITLE 38 TO AN ASSOCIATION OF MEMBERS INVOLVED IN ONE HAZARDOUS OCCUPATION.
Be it enacted by the General Assembly of the State of South Carolina:
Life insurance coverage for residents written out of state
SECTION 1. Section 38-65-60(1) of the 1976 Code is amended to read:
"(1) No life insurance coverage may be extended to residents of this State under a policy of group insurance issued outside this State which does not provide in substance the provisions of Section 38-65-210 unless the Commissioner determines that certain provisions are not appropriate for the coverage provided."
SECTION 2. Section 38-65-70 of the 1976 Code is amended to read:
"Section 38-65-70. Any policy issued pursuant to Section 38-65-40 may be extended to insure the employees or members against loss due to the death of their spouses and any child under the age of nineteen or who is a dependent and a full-time student under twenty-five years of age and also may be extended to any child who is both (i) incapable of self-sustaining employment by reason of mental retardation or physical handicap and (ii) chiefly dependent upon the employee for support and maintenance, subJect to the following requirements:
(1) The premium for the insurance must be paid by the policyholder from the policyholder's funds or from funds contributed by the insured persons, or from both.
(2) Upon termination of the insurance with respect to the members of the family of any employee or member by reason of the employee's or member's termination of employment, termination of membership in the class or classes eligible for coverage under the policy, or death, the spouse or child is entitled to have issued by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits as long as application for the individual policy is made and the first premium paid to the insurer within thirty-one days after the termination, subject to the requirements of subitems (a), (b), and (c) of Section 38-65-210(8). If the group policy terminates or is amended so as to terminate the insurance of any class of employees or members and the employee or member is entitled to have issued an individual policy under Section 38-65-210(9), the spouse also is entitled to have issued by the insurer an individual policy, subject to the conditions and limitations provided above in this item (2). If the spouse dies within the period during which he would have been entitled to have an individual policy issued in accordance with this provision, the amount of life insurance which he would have been entitled to have issued under the individual policy is payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium therefor has been made.
Notwithstanding Section 38-65-210(7), only one certificate need be issued for delivery to an insured person if a statement concerning a dependent's coverage is included in the certificate.
(3) The amounts of insurance must be based upon some plan precluding individual selection either by the employees or members or by the policyholder, employer, or union and may not exceed, with respect to a spouse or child, ten thousand dollars."
Individual policy - right to apply extended
SECTION 3. Article 1, Chapter 65 of the 1976 Code is amended by adding:
"Section 38-65-110. If an individual insured under a group life insurance policy delivered in this State becomes entitled under the terms of the policy to have an individual policy of life insurance issued without evidence of insurability, subject to making of application and payment of the first premium within the period specified in the policy, and if the individual is not given notice of the existence of this right at least fifteen days before the expiration date of the period, the individual has an additional period within which to exercise the right. Nothing contained in this section may be construed to continue any insurance beyond the period provided in the policy. This additional period expires fifteen days after the individual is given the notice but in no event may the additional period extend beyond sixty days after the expiration date of the period provided in the policy. Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder is notice for the purpose of this section."
Provisions required in all policies
SECTION 4. Section 38-65-210 of the 1976 Code is amended to read:
"Section 38-65-210. No policy of group life insurance may be delivered in this State unless it contains in substance the following provisions or provisions which in the opinion of the Commissioner are more favorable to the persons insured or at least as favorable to the persons insured and more favorable to the policyholder. However, (a) items (6) to ( 11 ), inclusive, do not apply to policies issued to a creditor, (b) the standard provisions required for individual life insurance policies do not apply to group life insurance policies, and (c) if the group life insurance policy is on a plan of insurance other than the term plan, it shall contain a nonforfeiture provision which in the opinion of the Commissioner is equitable to the insured persons and to the policyholder, but nothing may be construed in this section to require that group life insurance policies contain the same nonforfeiture provisions as are required for individual life insurance policies:
(1) A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium due except the first, during which grace period the death benefit coverage continues in force, unless the policyholder has given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder is liable to the insurer for the payment of a prorata premium for the time the policy was in force during the grace period.
(2) A provision that the validity of the policy may not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue and that no statement made by any person insured under the policy relating to his insurability may be used in contesting the validity of the insurance with respect to which the statement was made after the insurance has been in force before the contest for a period of two years during the person's lifetime nor unless it is contained in a written instrument signed by him.
(3) A provision that a copy of the application, if any, of the policyholder must be attached to the policy when issued, that all statements made by the policyholder or by the persons insured are considered representations and not warranties and that no statement made by any person insured may be used in any contest unless a copy of the instrument containing the statement is or has been furnished to the person or his beneficiary.
(4) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage.
(5) A provision specifying an equitable adjustment of premiums or of benefits, or of both, to be made in the event the age or sex of a person insured has been misstated. The provision shall contain a clear statement of the method of adjustment to be used.
(6) A provision that any sum becoming due by reason of the death of the person insured is payable to the beneficiary designated by the person insured, subject to the provisions of the policy in the event there is no designated beneficiary, as to all or any part of the sum, living at the death of the person insured and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of the sum not exceeding two thousand dollars to any person appearing to the insurer to be entitled equitably thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured.
(7) A provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable and the rights and conditions set forth in items (8), (9), and (10) of this section.
(8) A provision that if the insurance or any portion of it on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy that person is entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits so long as application for the individual policy is made and the first premium paid to the insurer within thirty-one days after the termination and so long as the following conditions are met:
(a) The individual policy is, at the option of the individual, on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for the amount applied for. (b) The individual policy is in an amount not in excess of the amount of life insurance which ceases because of the termination, less, in the case of a person whose membership in the class or classes eligible for coverage terminates but who continues in employment in another class, the amount of any life insurance for which the person is or becomes eligible under any other group policy within thirty-one days after the termination. Any amount of insurance which has matured on or before the date of the termination as an endowment payable to the person insured, whether in one sum or in installments or in the form of an annuity, is not, for the purposes of this provision, included in the amount which is considered to cease because of the termination.
(c) The premium on the individual policy is at the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which the person then belongs, and to his age attained on the effective date of the individual policy.
(9) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of the termination whose insurance terminates and who has been so insured for at least five years before the termination date is entitled to have issued to him by the insurer an individual policy of life insurance, subJect to the same conditions and limitations as are provided by item (8) of this section, except that the group policy may provide that the amount of the individual policy may not exceed the smaller of (a) the amount of the person's life insurance protection ceasing because of the termination or amendment of the group policy, less the amount of any life insurance for which he is or becomes eligible under any group policy issued or reinstated by the same or another insurer within thirty-one days after the termination and (b) ten thousand dollars. (10) A provision that if a person insured under the group policy dies during the period within which he would have been entitled to have an individual policy issued to him in accordance with item (8) or (9) of this section and before the individual policy has become effective the amount of life insurance which he would have been entitled to have issued to him under the individual policy is payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium therefor has been made.
(11) Where active employment is a condition of insurance, a provision that an insured may continue coverage during the insured's total disability by timely payment to the policyholder of that portion, if any, of the premium that would have been required from the insured had total disability not occurred. Unless otherwise provided by law, the continuation must be on a premium-paying basis for a period of six months from the date on which the total disability started, but not beyond the earlier of (a) approval by the insurer of continuation of the coverage under any disability provision which the group insurance policy may contain or (b) the discontinuance of the group insurance policy.
(12) In the case of a policy issued to a creditor, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a certificate of insurance describing the coverage and specifying that the death benefit first must be applied to reduce or extinguish the indebtedness."
Insurance on franchise or wholesale plan
SECTION 5. Section 38-65-310 of the 1976 Code is amended to read:
"Section 38-65-310. Nothing contained in this chapter is considered to prohibit a life insurer from issuing life, term, and endowment insurance on the franchise plan, with or without annuities. The insurance under a franchise agreement or upon a wholesale basis may be written under rates less than the usual rates for the insurance. This insurance is subject to the following provisions:
(1) The term 'franchise' or 'wholesale' insurance means a life insurance plan under which a number of individual life insurance policies are issued at special rates to a selected group. A special rate is any rate lower than the rate shown in the issuing insurer's manual for individually issued policies of the same type and to insureds of the same class.
(2) No franchise or wholesale life insurance plan may be entered into in this State unless the individuals to whom the insurance is made available are members of a professional association, employees of a common employer or affiliated employers, or unless the insurance is made available in connection with an indebtedness or a contract of sale. The word 'employees', as used herein, is considered to include the individual proprietors or partners who constitute the employer or affiliated employers and may include retired employees of any employer or affiliated employer.
(3) The association may not be formed, exist, or be continued for the sole or primary purpose of obtaining such insurance.
(4) For purposes of this section, a professional association means an association whose membership is restricted to one or more of the licensed professions such as medicine, dentistry, pharmacy, law, and accountancy.
(5) Each plan must have an eligibility period for the initial enrollment and for any new employees or members entering, and during this time insurance must be obtained without the requirement of statement of health "
SECTION 6. Section 38-65-80 of the 1976 Code is repealed.
SECTION 7. This act takes effect January 1, 1989.