Vermont § 3762 - Nonforfeiture benefits

§ 3762. Nonforfeiture benefits

• (a) In the case of policies issued on or after the effective date of this subchapter,
  as defined in section 3773 of this subchapter, a policy of life insurance, except
  as stated in section 3772 of this subchapter, shall not be delivered or issued for
  delivery in this State unless it contains in substance the following provisions, or
  corresponding provisions that, in the opinion of the Commissioner, are at least as
  favorable to the defaulting or surrendering policyholder as are the minimum requirements
  specified in this section and are essentially in compliance with section 3771 of this
  subchapter. (1) In the event of default in any premium payment, the company shall grant, upon proper
  request not later than 60 days after the due date of the premium in default, a paid-up
  nonforfeiture benefit on a plan stipulated in the policy, effective as of the due
  date, of such amount as may be specified in this section. In lieu of the stipulated
  paid-up nonforfeiture benefit, the company may substitute, upon proper request not
  later than 60 days after the due date of the premium in default, an actuarially equivalent
  alternative paid-up nonforfeiture benefit that provides a greater amount or earlier
  payment of endowment benefits. (2) Upon surrender of the policy within 60 days after the due date of any premium payment
  in default after premiums have been paid for at least three full years in the case
  of ordinary insurance or five full years in the case of industrial insurance, the
  company shall pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender
  value of an amount as may be specified in this section. (3) A specified paid-up nonforfeiture benefit shall become effective as specified in the
  policy unless the person entitled to make the election elects another available option
  not later than 60 days after the due date of the premium in default. (4) If the policy becomes paid-up by completion of all premium payments or if it is continued
  under any paid-up nonforfeiture benefit that became effective on or after the third
  policy anniversary in the case of ordinary insurance or the fifth policy anniversary
  in the case of industrial insurance, the company shall pay upon surrender of the policy
  within 30 days after any policy anniversary, a cash surrender value of an amount as
  may be specified in this section. (5) If a policy causes, on a basis guaranteed in the policy, unscheduled changes in benefits
  or premiums, or provides an option for changes in benefits or premiums, other than
  a change to a new policy, the company shall provide the policyholder a statement of
  the mortality table, interest rate, and method used in calculating cash surrender
  values and the paid-up nonforfeiture benefits available under the policy. In the case
  of all other policies, a company shall provide to its policyholders a statement of
  the mortality table and interest rate used in calculating the cash surrender values
  and the paid-up nonforfeiture benefits available under the policy, together with a
  table showing the cash surrender value, if any, and paid-up nonforfeiture benefit,
  if any, available under the policy on each policy anniversary either during the first
  20 policy years or during the term of the policy, whichever is shorter, such values
  and benefits to be calculated upon the assumption that there are no dividends or paid-up
  additions credited to the policy and that there is no indebtedness to the company
  on the policy. (6) A company shall provide statement that the cash surrender values and the paid-up nonforfeiture
  benefits available under the policy are not less than the minimum values and benefits
  required by or pursuant to the insurance law of the state in which the policy is delivered;
  an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture
  benefits are altered by the existence of any paid-up additions credited to the policy
  or any indebtedness to the company on the policy; if a detailed statement of the method
  of computation of the values and benefits shown in the policy is not stated therein,
  a statement that such method of computation has been filed with the insurance supervisory
  official of the state in which the policy is delivered; and a statement of the method
  to be used in calculating the cash surrender value and a paid-up nonforfeiture benefit
  available under the policy on any policy anniversary beyond the last anniversary for
  which values and benefits are consecutively shown in the policy. (b) Any of the provisions in subsection (a) of this section, or portions thereof, not
  applicable by reason of the plan of insurance may be omitted from the policy, to the
  extent inapplicable. (c) The company shall reserve the right to defer the payment of any cash surrender value
  for a period of six months after demand therefor with surrender of the policy. (d) No individual policy of life insurance covering an individual 64 years of age or older
  that has been in force for at least one year shall be canceled for nonpayment of premium
  unless, after expiration of the grace period and not less than 21 days before the
  effective date of any such cancellation, the insurer has mailed a notice of impending
  cancellation in coverage to the policyholder and to a specified secondary addressee
  if such addressee has been designated by name and address in writing by the policyholder.
  An insurer shall notify the applicant of the right to designate a secondary addressee
  at the time of application for the policy on a form provided by the insurer, and annually
  thereafter, and the policyholder shall have the right to designate a secondary addressee,
  in writing, by name and address, at any time the policy is in force, by submitting
  such written notice to the insurer. If a life insurance policy provides a grace period
  longer than 51 days for nonpayment of premium, the notice of cancellation in coverage
  required by this subsection shall be mailed to the policyholder and to the secondary
  addressee not less than 21 days prior to the expiration of the grace period provided
  in such policies. (Added 2015, No. 63, § 2, eff. June 17, 2015; amended 2017, No. 80, § 1.)