No policy of life or endowment insurance, except policies of industrial insurance where the premiums are payable monthly or oftener, shall hereafter be delivered in this Commonwealth unless it contains, in substance, the following provisions or provisions which, in the opinion of the Insurance Commissioner, are more favorable to the policyholder:--
(a) A provision that all premiums shall be payable in advance.(b) A provision that the insured is entitled to a grace, either of thirty days or one month, within which the payment of any premium after the first year may be made, subject, at the option of the company, to an interest charge not in excess of eight per centum per annum for the number of days of grace elapsing before the payment of the premium, during which period of grace the policy shall continue in full force; but in case the policy becomes a claim during the said period of grace, before the overdue premium, or the deferred premiums of the current policy year, if any, are paid, the amount of such premiums, with interest on any overdue premiums, may be deducted in any settlement under the policy.(c) A provision that the policy shall be incontestable after it has been in force, during the lifetime of the insured, two years from its date of issue, except for nonpayment of premiums; and that, at the option of the company, provisions relative to disability benefits, and provisions which grant additional insurance specifically against death by accident or accidental means, may also be excepted.(d) A provision that the policy shall constitute the entire contract between the parties; but if the company desires to make the application a part of the contract, it may do so, provided a copy of such application shall be endorsed upon or attached to the policy when issued, and in such case the policy shall contain a provision that the policy and the application therefor shall constitute the entire contract between the parties.(e) A provision that, if the age of the insured or of any other person whose age is considered in determining the premium has been misstated, the amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages.(f) A provision that the policy shall participate in the surplus of the company, and that, beginning not later than the end of the third policy-year, the company will annually determine the portion of the divisible surplus accruing on the policy, and that the party entitled to elect such option shall have the right to have the dividend arising from such participation paid in cash, or applied in accordance with any one of such other dividend options as may be provided by the policy. If any such other dividend options are provided, the policy shall further state which option shall be automatically effective, if such party shall not have elected some other option. In lieu of the foregoing provisions, the policy may contain a provision that the policy shall participate in the surplus of the company, and that, beginning not later than the end of the fifth policy-year, the company will determine the portion of the divisible surplus accruing on the policy, and that the party entitled thereto shall have the right to have the current dividend arising from such participation paid in cash, and that, at periods of not more than five years thereafter, such apportionment and payment, at the option of such party, shall be had.
Renewable term policies of ten years or less may provide that the surplus accruing to such policies shall be determined and apportioned each year after the second policy-year, and accumulated during each renewal period, and that at the end of any renewal period, or renewal of the policy by the insured, the company shall apply the accumulated surplus as an annuity for the next succeeding renewal term in the reduction of premiums.
(g) A provision specifying the options if any to which the policy-holder is entitled in the event of default in a premium payment.(h) A provision for a loan value at any time after three full years' premiums have been paid and while no premium is in default beyond the grace period of payment. (1) In the case of any policy issued prior to the operative date of section four hundred and ten A of this act (the Standard Non-forfeiture Law), it shall be provided that the company will advance, on proper assignment or pledge of the policy, and on the sold security thereof, at a specified rate of interest, a sum equal to, or, at the option of the owner of the policy, less than, the reserve at the end of the current policy year on the policy, and on any dividend additions thereto, less a sum not more than two and one-half per centum of the amount insured by the policy and of any dividend additions thereto; and that the company will deduct from such loan value any existing indebtedness on the policy, and any unpaid balance of the premium for the current policy-year, and may collect interest in advance on the loan to the end of the current policy-year; which provision may further provide that such loan may be deferred for not exceeding six months after the application therefor is made. A company may, in lieu of the provision hereinabove permitted for the deduction from a loan on the policy of a sum not more than two and one-half per centum of the amount insured by the policy and of any dividend additions thereto, insert in the policy a provision that one-fifth of the entire reserve may be deducted in case of a loan under the policy; or may provide therein that the deduction may be the said two and one-half per centum, or the one-fifth of the said entire reserve, at the option of the company.(2) In the case of any policy issued on or after the operative date of section four hundred and ten A of this act (the Standard Nonforfeiture Law for Life Insurance), the loan provision shall provide that the company will advance, on proper assignment or pledge of the policy, and on the sole security thereof, at a specified rate of interest not exceeding eight per centum per annum for policies issued prior to the effective date of section four hundred and ten F, a sum equal to, or, at the option of the party entitled thereto, less than, the cash surrender value at the end of the current policy year as required by section four hundred and ten A of this act; and that the company may deduct from such loan value (in addition to any indebtedness deducted in determining such value) any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year. The company shall reserve the right to defer such loan, except any made to pay premiums to the company, for six months after application therefor is made. This subsection (h) shall not apply to term insurance.(i) A provision for a non-forfeiture and cash surrender value.(1) In the case of any policy issued prior to the operative date of section four hundred and ten A of this act (the Standard Non-forfeiture Law), a non-forfeiture benefit shall be provided in event of default in premium payments after premiums shall have been paid for three years, which shall secure to the owner of the policy a stipulated form of insurance, the net value of which shall be at least equal to the reserve at the date of default on the policy and on any dividend additions thereto, specifying the mortality table and rate of interest adopted for computing such reserves, less a sum not more than two and one-half per centum of the amount insured by the policy and of any existing dividend additions thereto, and less any existing indebtedness to the company on the policy. Such provision shall stipulate that the policy may be surrendered to the company, at its home office, within one month from date of default, for a specified cash value at least equal to the sum which would otherwise be available for the purchase of insurance as aforesaid, and may stipulate that the company may defer payment for not more than six (6) months after the application therefor is made. This provision shall not be required in term insurance of twenty years or less.(2) In the case of any policy issued on or after the operative date of section four hundred and ten A of this act (the Standard Non-forfeiture Law), a non-forfeiture benefit and cash surrender value shall be provided in accordance with said section.(j) A table showing in figures the loan value, if any, and the options, if any, available under the policy, each year, upon default in premium payments, during at least the first twenty years of the policy; and if the proceeds of the policy are payable in installments which are determinable prior to maturity of the policy, a table showing the amount of the guaranteed installments.(k) A provision that the holder of a policy shall be entitled to have the policy reinstated, upon written application therefor, at any time within three years from the date of default in premium payments, unless the policy has been duly surrendered or the extension period expired, upon the production of evidence of insurability satisfactory to the company, and payment of all overdue premiums with interest at a rate to be specified in the policy but not exceeding eight per centum per annum, and the payment of any other indebtedness to the company upon said policy with interest at a rate or rates determined in accordance with section four hundred and ten F, compounded annually.(l) A provision that when a policy shall become a claim by the death of the insured settlement shall be made upon receipt of due proof of death. Any of the foregoing provisions, or parts thereof, not applicable to single premium or non-participating policies, shall, to that extent, not be incorporated therein: Provided, however, That the policies of an insurance company organized under the laws of any state or foreign government may contain, when delivered in this Commonwealth, any provision which may be prescribed by laws of the state or government under which the company is organized; and the policies of a life insurance company organized under the laws of this Commonwealth may, when delivered in any other state, territory, or foreign country, contain any provision required by the laws of such state, territory, or foreign country to be contained in policies delivered therein. A clause in any policy of life insurance providing that such policy shall be incontestable after a specified period shall preclude only a contest of the validity of the policy and shall not preclude the assertion, at any time, of defenses based upon provisions in the policy which exclude or restrict coverage, whether or not such restrictions or exclusions are excepted in such clause.
1921, May 17, P.L. 682, art. IV, § 410. Amended 1935, July 15, P.L. 1020, § 1; 1937, June 4, P.L. 1634, § 1; 1945, May 1, P.L. 334, § 1; 1951, July 19, P.L. 1100, § 9; 1980, July 1, P.L. 336, No. 84, § 1, effective 7/1/1980; 1982, April 8, P.L. 297, No. 84, § 1, imd. effective.