New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter III - Policy and Certificate Provisions
Subchapter A - Life, Accident and Health Insurance
Part 41 - Accelerated Payment Of The Death Benefit Under A Life Insurance Policy
Section 41.5 - Benefit levels, payment criteria, and policy provisions

(a) An insurer may establish a minimum policy issue amount for which accelerated death benefits will be made available.

(b) A policy shall set forth, if applicable, the minimum amount and the maximum amount that may be accelerated.

(c) The present value of the amounts to be accelerated shall not exceed the death benefit of the policy and the death benefit shall be reduced each time an accelerated payment is made by the amount of death benefit accelerated. Any additional accelerated death benefits pursuant to Insurance Law section 1113(a)(1)(C) and (D) payable in excess of the death benefit may only be provided if there are no premium requirements for such benefits once those benefits are being paid.

(d) Notwithstanding the requirements of subdivision (c) of this section, a residual death benefit, not subject to any acceleration, may be paid in the event of death of an insured irrespective of the amount of the death benefit that has been paid as an acceleration of the death benefit pursuant to Insurance Law section 1113(a)(1)(C) and (D). Such residual death benefit may not exceed the lesser of 10 percent of the highest death benefit that existed at the time an accelerated payment was made pursuant to Insurance Law section 1113(a)(1)(C) or (D) and $25,000. Any residual death benefits payable in excess of the death benefit less the accelerated benefit paid, may only be provided if there are no additional premium requirements for such benefits once those benefits are available.

(e) In the case of accelerated death benefits under Insurance Law section 1113(a)(1)(A), (B), (E) or (F):

(f) The policy shall describe the effect, if any, of the payment of the accelerated death benefit on any remaining death benefits, nonforfeiture benefits, loan values, and premium payments.

(g) The aggregate administrative expense charge required for receipt of the accelerated death benefit in installments shall not exceed 110 percent of the administrative expense charge required for receipt of the accelerated benefit in a lump sum.

(h) A medical condition requiring extraordinary medical care or treatment regardless of life expectancy shall be specified in the policy and may include one or more of the following:

(i) The insurer may require a separate premium charge or cost of insurance charge for the accelerated death benefit. In the case of premium charges for group policies, the premium charge associated with an accelerated death benefit option may be assessed as part of an experience based rate or as a separate premium charge. The policy or certificate, if the certificateholder is required to pay such charge, shall disclose any such charges and any administrative expense charges. The policy shall also describe the effect, if any, of such charges on the policy dividends or additional amount credits, the period of coverage, account value, nonforfeiture benefits and loan value.

(j) The insurer may pay a discounted accelerated death benefit. A discounted accelerated death benefit is paid any time the actual cash or equivalent received by the policyowner or certificateholder is less than the amount of the death benefit accelerated. The calculation shall be based on any applicable actuarial discount appropriate to the policy design. The interest rate or interest rate methodology used in the calculation and its application shall be disclosed in the policy. The maximum interest rate used shall not exceed the greater of:

(k) When an accelerated death benefit on either a discounted or nondiscounted basis is payable, there shall be no more than a pro rata reduction in the cash value based on the percentage of death benefits accelerated to produce the accelerated benefit payment.

(l) Under the lien approach, the payment of any accelerated death benefits, any administrative expense charges, any future premiums and any accrued interest can be considered a lien against the death benefit of the policy and the access to the cash value may be restricted to any excess of the cash value over the sum of any other outstanding loans and the lien. Future access to additional policy loans and partial withdrawals may also be limited to any excess of the cash value over the sum of the lien and any other outstanding policy loans. Under the lien approach, the insurer may accrue an interest charge on the amount of the accelerated benefits. The interest rate or interest rate methodology used in the calculation and its application shall be disclosed in the policy. The maximum interest rate used shall not exceed the greater of:

(m) Under the lien approach:

(n) For policies or certificates that provide for the benefit payment pursuant to Insurance Law section 1113(a)(1)(A) or (B) when payment of the accelerated benefit results in a pro rata reduction in account value or nonforfeiture benefits, the payment shall be applied toward repaying a portion of loan equal to a pro rata portion of any outstanding policy loans unless disclosure of the effect of acceleration upon any remaining death benefit, account value, nonforfeiture benefits, policy loan and premium payments including a statement of the possibility of termination of any remaining death benefit is provided to the policyowner or certificateholder. The policyowner or certificateholder shall also provide written consent authorizing a different percentage.

(o) No restrictions shall be permitted on the use of the proceeds from the policy.

(p) If any death benefit remains after payment of an accelerated death benefit any accidental death benefit provision shall not be affected by payment of the accelerated benefit.

(q) Upon the possible remission or cure of the terminal illness, medical condition or chronic illness, no attempt will be made by the insurer to recover the benefits paid.

(r) A group life policy shall provide that only the certificateholder has the right to the accelerated death benefit payment.

(s) The policy shall specify whether any premium due after the initial accelerated death benefit is established needs to be paid in cash, or whether the payment can be waived or whether additional accelerated death benefit payments must be made to cover such premiums as they become due.

(t) The policy shall specify the actions required, if any, to prevent policy or certificate termination if future premiums or interest due requires an additional acceleration of the death benefit which would result in a total accelerated benefit payment exceeding the percentage or dollar maximum amount specified in the policy. The policyowner or certificateholder must always have the right to pay that excess in cash within an appropriate grace period in order to prevent policy or certificate termination. The policy may also specify that future premiums or interest becoming due must be paid in cash.

(u) The policy shall specify whether the accelerated death benefit provision would apply to the initial death benefit amount or the current death benefit amount for universal life or variable universal life policies resulting from automatic increases due to section 7702 of the Internal Revenue Code or applied for increases permitted under the terms of the policy, as well as increases that result from operation of the contract.

(v)

(w) Except in the case of accelerated death benefits under Insurance Law section 1113(a)(1)(C) or (D), exclusions for the payment of the accelerated death benefit will be permitted only in accordance with the applicable provisions of the Insurance Law pertaining to life insurance.

(x) If accelerated payment of the death benefit is provided in the policy, the benefit shall be set forth in a separate provision appropriately captioned as an accelerated death benefit.