California Code of Regulations
Title 10 - Investment
Chapter 5 - Insurance Commissioner
Subchapter 3 - Insurers
Article 12.2 - Standard Supplemental Disclosure Forms for Disability Insurance
Section 2540.4 - Disclosure Forms for Use with Policies: Drafting Instructions
Current through Register 2024 Notice Reg. No. 38, September 20, 2024
Disclosure forms for use with policies shall be drafted in accordance with the following subsections, which refer to the paragraphs identified by bracketed numbers in the prototype disclosure forms set forth in Section 2540.5. Text in parentheses in the prototype forms may be varied as specified, except that the word "policy" may be replaced by an appropriate term such as "benefit agreement" where coverage is provided by a non-profit hospital service plan. Bracketed text in the prototype forms is instructional and need not appear in the forms as issued.
(a) Drafting Instructions for Paragraph [1]. The insurer's name may be substituted for the phrase, "your insurance company." This paragraph may be omitted from disclosure forms used with or incorporated into advertisements.
(b) Drafting Instructions for Paragraphs [2]. Each benefit enumerated in the prototype description of the category of coverage shall be stated, regardless of whether the policy with which the disclosure form is to be used provides that benefit. Unless provided otherwise, this paragraph may be omitted if the optional text appearing in parentheses in Paragraph [4] is used in that paragraph. This paragraph may also be omitted if no such optional text appears in Paragraph [4] of the appropriate prototype form.
(c) Drafting Instructions for Paragraph [3]. This paragraph shall set forth, in the order prescribed, a brief specific description of the benefits, including dollar amounts and number of days duration where applicable, provided by the policy with which the disclosure form is to be used. The description shall be stated clearly and concisely and shall include a description of any elimination periods, deductible amounts or co-payment requirements applicable to the benefits described. Where a benefit enumerated in this paragraph is not provided by the policy, it shall be listed with a notation to the effect that no coverage is provided therefor. Where the policy information required to be disclosed in this paragraph is variable at the option of the applicant, a disclosure form used with or incorporated into an advertisement may set forth the ranges over which such information may vary.
(d) Drafting Instructions for Paragraph [4]. This paragraph shall set forth a description of any policy provisions which exclude, eliminate, restrict, reduce, limit or in any other manner operate to reduce or deny payment of the benefits described in Paragraph [3]. Limitations on coverage for pre-existing conditions and any Uniform Policy Provisions which may have the effect of reducing or denying payment of benefits shall be briefly described in this paragraph. Provisions which may have the effect of reducing benefits otherwise payable because of other coverage shall be briefly described in this paragraph. Where Paragraph [2] is omitted, the optional text, if any, appearing in parentheses in this paragraph shall be used in this paragraph.
(e) Drafting Instructions for Paragraph [5]. A description of policy provisions respecting renewability or continuation of coverage shall appear in this paragraph. Where coverage is provided by a non-profit hospital service plan, an appropriate phrase, such as "term of coverage," many be substituted for the word "renewability."
(f) Drafting Instructions for Paragraph [6]. The total premium payable by the insured for the coverage shall be stated in this paragraph. The mode of payment for the premium specified shall be prominently disclosed in conjunction with the premium. Initial policy fees may be stated separately, but recurring policy fees must be included within the total premium. If premiums are "step-rated," the premium for each step may be disclosed or the initial premium may be disclosed, accompanied by a statement to the effect of, "Renewal premiums for this policy will increase periodically depending upon (your age) (the policy year). Refer to the policy schedule for details." Unless a policy is issued with guaranteed premium rates, this paragraph must contain the statement, "Premiums are subject to change." Where coverage is provided by a non-profit hospital service plan, an appropriate phrase, such as "subscription charge," may be substituted for the word, "premium." Disclosure forms used with or incorporated into advertisements may refer to accompanying rate schedules in lieu of setting forth such schedules.
1. Amendment
filed 1-8-76; effective thirtieth day thereafter (Register 76, No. 2).
2.
Amendment of subsection (b) filed 4-5-78; designated effective 1-1-79 (Register 78,
No. 14).
Note: Authority cited: Sections 10293(a) and 10608, Insurance Code.
