Weekly Tip: Accelerated Death Benefit Termination Conditions

 

Weekly Tips

Accelerated Death Benefit Termination Conditions

3/06/2015

This week we are highlighting a specific Uniform Standards provision. One of the most frequently submitted benefit features is accelerated death benefits for an individual life insurance policy. We approved more than 40 accelerated death benefit features in 2014 alone. Previous weekly tips have covered recent amendments to the Additional Standards for Accelerated Death Benefits. This week’s tip concerns the application of these Uniform Standards.

Accelerated death benefit submissions occasionally include a termination condition based on the insured reaching a specified age, such as age 90. We have also seen submissions that would limit the benefit if the insured is beyond a specified age at the time the qualifying illness is diagnosed. These limitations are not permitted because per the Exclusions/Restrictions provision at Section 3D(1), the accelerated death benefit cannot contain a limitation or restriction that does not apply to the underlying policy. In addition, the Termination provision at Section 3K contains three required conditions of termination and only one permissive condition, as follows:

(1) The form shall state that the accelerated death benefit shall end at the earliest of:
(a) Upon written request from the owner;
(b) Upon termination of the policy; or
(c) Upon nonpayment of any separate premium or COI charge for the accelerated death benefit, in accordance with the provisions of the form or the policy.

(2) The form may state that the accelerated death benefit may terminate when a nonforfeiture benefit becomes effective under the policy.

To avoid objections related to these provisions, please ensure that exclusions, restrictions and termination provisions in accelerated death benefit features comply with these requirements. If there are questions about how these Uniform Standards provisions would apply to your planned submission, please contact the Insurance Compact Office for more information.