(a) No life insurance policy other than industrial insurance, annuities, and pure endowments shall be issued or delivered in the District or shall be issued by a life company organized under District laws after the 1st day of January, 1935, unless the policy has the following features:
(1) A provision that all premiums after the 1st year shall be payable in advance, either at the home office of the company or to an agent of the company, upon delivery of a receipt signed by 1 or more of the officers who shall be designated in the policy.
(2)(A) A provision that the insured is entitled to a grace period of at least 30 days or of 1 month within which the payment of any premiums after the 1st year may be made, subject at the option of the company to an interest charge not in excess of 6 per centum per year for the number of days of grace elapsing before the payment of the premium.
(B) A provision that, if the policy becomes a claim during the grace period before overdue or deferred premiums of the current policy year are paid, the amount of the premiums, with interest on any overdue premiums, may be deducted from any settlement payable under the policy.
(C) A provision that grace shall begin on the premium-paying date stated in the policy.
(3)(A)(i) Except as provided in subparagraphs (B) and (C) of this paragraph, a provision that the policy shall constitute the entire contract between the parties and shall be incontestable after it has been in force during the lifetime of the insured for at least 2 years from its date, except for nonpayment of premiums and except for violations of the conditions of the policy relating to naval or military service during a war, and at the option of the company, provisions relative to benefits when total and permanent disability occurs and provisions granting additional insurance specifically against death by accident may also be excepted.
(ii) All statements made by the insured shall, in the absence of fraud, be considered representations and not warranties.
(iii) No statements by the insured shall be used in defense of a claim under the policy unless the statements are in a written application and a copy of the statements are endorsed upon or attached to the policy when issued.
(B) A provision that nothing in this paragraph applies to applications for reinstatement.
(C) A provision that a reinstated policy shall be contestable for fraud or for misrepresenting material facts for as long a period as provided by the original policy.
(4) A provision that if the company discovers before the final settlement that the age of the insured (or the age of the beneficiary, if considered in determining the premium) has been wrongly stated, the amount payable under the policy shall be the amount the premium would have purchased had the correct age been stated, according to the company’s rate at date of issue.
(5)(A)(i) A provision that the policy shall participate in the surplus of the company and that any policy containing provisions for participation at the end of the 1st policy year and afterwards may also provide that each dividend shall be paid subject to the payment of premium for the next year.
(ii) A provision that the insured under any annual dividend policy shall have the right each year to receive dividends from the participation paid in cash.
(iii) A provision that if the policy provides other dividend options, the policy shall explain which options shall be effective if the insured does not elect any of the other options by the end of the grace period allowed for paying the premium.
(B) A provision that the requirements described in subparagraph (A) of this paragraph shall not apply to any form of paid-up insurance, temporary insurance, or pure endowment insurance issued or granted in exchange for lapsed or surrendered policies and shall not apply to nonparticipating policies.
(6)(A)(i) Except as provided in subparagraphs (A)(iv), (v), and (B) of this paragraph, a provision that, after the policy has been in force for 3 full years, the company will loan to the insured, while the policy is in force, on proper assignment or pledge of the policy and on the sole security of the policy and at a specified interest rate, a sum equal to or, at the option of the insured, less than the amount required by § 31-4705.02.
(ii) A provision that the company will deduct from the loan value any indebtedness not already deducted when determining the value and any unpaid balance on premiums for the current policy year.
(iii) A provision that the company may collect, in advance, interest on the loan to the end of the current policy year.
(iv) The provisions described in subparagraph (A)(i) through (iii) of this paragraph shall not be required in term insurance, temporary insurance, or pure endowment insurance issued or granted in exchange for lapsed or surrendered policies. The policy may further provide that if the interest on the loan is not paid when due, it shall be added to the existing loan and shall bear interest at the same rate.
(v) The specified interest rate mentioned in subparagraph (A)(i) of this paragraph shall not apply to policies issued after March 14, 1985.
(B) Policies issued after March 14, 1985, shall include a provision describing the policy loan interest rates to be 1 of the following:
(i) Not more than 8% per year.
(ii) An adjustable maximum interest rate established by the company under subparagraph (C) of this paragraph.
(C) The interest rate described in paragraph (6)(B)(ii) of this subsection shall be in a policy which describes how frequently the company determines the rates, and the rates shall not exceed the higher of the following:
(i) The published monthly average for the calendar month ending 2 months before the company determines the interest rate; or
(ii) The sum of 1 per centum per year and the rate used by the company when computing the cash surrender value during the applicable period.
(D) For policies issued after March 14, 1985, which contain an interest rate determined pursuant to subparagraph (B)(ii) of this paragraph, the following provisions shall be included in the policy:
(i) The maximum interest rate shall be determined at least once every 12 months, at regular intervals, but not more frequently than once every 3 months.
(ii) The interest rate being charged may be increased when the rate-determination standards described in subparagraph (C) of this paragraph indicate at least a 1/2% per year increase in the maximum rate.
(iii) The interest rate being charged shall be decreased when the rate-determination standards described in subparagraph (C) of this paragraph require at least a 1/2% per year decrease in the maximum rate.
(E) Except as provided in subparagraph (E)(v) of this paragraph and for policies issued after March 14, 1985, policies shall include a provision that the company shall notify, in the following manner, a policyholder who borrows under the policy:
(i) When the company makes a cash loan, a written notice of the initial interest rate.
(ii) When the company makes a premium loan, a written notice, within a reasonable time after the loan, of the initial interest rate.
(iii) When the company plans to increase the interest rate, a written notice within a reasonable time before the rate increase of the change in the rate.
(iv) Every notice described in this subparagraph shall describe how frequently the company, under subparagraph (C) of this paragraph, reevaluates the rates and also shall describe, under subparagraph (B) of this paragraph, the rates either as no more than 8% per year or as an adjustable rate under subparagraph (C) of this paragraph.
(v) Except as provided in subparagraph (E)(iii) of this paragraph, notice shall not be required for premium loans added to an original premium loan described in subparagraph (E)(ii) of this paragraph.
(F) The loan value of the policy shall be determined according to § 31-4705.04, but no policy shall terminate in a policy year as the sole result of change in the interest rate and the life insurer shall maintain coverage until the time at which it would otherwise have terminated if there had been no increase during that policy year.
(G) For purposes of subparagraphs (B) through (G) of this paragraph:
(i) The term “published monthly average” means Moody’s Corporate Bond Yield Average—Monthly Average Corporates published by Moody’s Investors Service, Inc., or any successor thereto; or in the event that Moody’s Corporate Bond Yield Average—Monthly Average Corporates is no longer published, a substantially similar average, established by regulation issued by the Commissioner.
(ii) The rate of interest on policy loans permitted under this subsection also includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy.
(iii) The term “policy loan” also includes any premium loan made under a policy to pay 1 or more premiums that were not paid to the life insurer as they fell due.
(iv) The term “policyholder” includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer.
(v) The term “policy” also includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans.
(H) No other provision of law shall apply to policy loan interest rates unless made specifically applicable to such rates.
(I) The provisions of subparagraphs (B) through (H) of this paragraph shall not apply to any insurance contract issued before March 14, 1985, unless the policyholder agrees in writing to the application of such provisions.
(7) A provision for nonforfeiture benefits and cash surrender values according to the requirements of § 31-4705.01 or § 31-4705.02.
(8) A provision specifying the options, if any, to which the policyholder is entitled in the event of default in a premium payment.
(9) A table showing in figures the loan values and the options available under the policy each year upon default in premium payments, during at least the first 20 years of the policy or during the premium paying period if less than 20 years.
(10) A provision that if in event of default in premium payments the value of the policy shall have been applied to the purchase of other insurance as provided for in this section, and if such insurance shall be in force and the original policy shall not have been surrendered to the company and cancelled, the policy may be reinstated within 3 years from such default, upon evidence of insurability satisfactory to the company and payment of arrears of premiums and the payment or reinstatement of any other indebtedness to the company upon said policy, with interest on said premium at the rate of not exceeding 6% per annum payable annually, and that such reinstated policy shall be contestable, on account of suicide, fraud, or misrepresentation of material facts pertaining to the reinstatement, for the same period after reinstatement as provided in the policy with respect to the original issue. The rate of interest on policy loans permitted under this subsection also includes the interest rate charged on reinstatement policy loans for the period during and after any lapse of the policy.
(11) A provision that, when a policy shall become a claim by death of the insured, settlement shall be made upon receipt of due proof of death.
(12) A table showing the amount of installments, if any, in which the policy may provide its proceeds may be payable.
(13) Title on the face and on the back of the policy briefly describing its form.
(b) Any of the foregoing provisions or portions thereof not applicable to single premium or nonparticipating or term policies shall, to that extent, not be incorporated therein; and any such policy may be issued or delivered in the District which in the opinion of the Commissioner contains provisions on any 1 or more of the several foregoing requirements more favorable to the policyholder than hereinbefore required. The provisions of this section shall not apply to policies of reinsurance, or to policies issued or granted in exchange for lapsed or surrendered policies, or to group insurance.
(June 19, 1934, 48 Stat. 1158, ch. 672, ch. V, § 3; Feb. 19, 1948, 62 Stat. 30, ch. 66, § 2; Oct. 13, 1978, D.C. Law 2-120, § 4, 25 DCR 1519; Mar. 14, 1985, D.C. Law 5-160, § 3(e), 32 DCR 39; Feb. 24, 1987, D.C. Law 6-192,§ 25(a)-(d), 33 DCR 7836; May 21, 1997, D.C. Law 11-268, § 10(j), 44 DCR 1730.)
Prior Codifications1981 Ed., § 35-503.
1973 Ed., § 35-703.
Section ReferencesThis section is referenced in § 31-4705.01 and § 31-4705.04.
Cross ReferencesFalse statements in application, effect, see § 31-4314.
Special provisions governing industrial policies, see § 31-4801 et seq.