Required and Prohibited Provisions Generally

  1. Law
  2. Georgia Code
  3. Insurance
  4. Industrial Life Insurance
  5. Required and Prohibited Provisions Generally

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  1. No policy of industrial life insurance shall be delivered or issued for delivery in this state unless it contains in substance the following provisions or contains provisions which in the opinion of the Commissioner are more favorable to policyholders:
    1. GRACE PERIOD. A provision that the insured is entitled to a grace period of not less than 30 days within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in force. If a claim arises under the policy during such period of grace, the amount of any premium due or overdue may be deducted from any amount payable under the policy in settlement;
    2. INCONTESTABILITY. A provision that the policy (exclusive of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means) shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue;
    3. ALTERATION OF CONTRACT. A provision that no agent shall have the power or authority to waive, change, or alter any of the terms or conditions of any policy, except that at the option of the insurer, prior to the issuance of a policy, the terms or conditions may be changed by an endorsement or rider which is signed by a duly authorized officer of the insurer and receipt of which is acknowledged by the applicant in writing;
    4. MISSTATEMENT OF AGE. A provision that, if the age of the person insured or of any other person whose age is considered in determining the premium or benefit has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages;
    5. DIVIDENDS. A provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy. Except as provided in this Code section, any dividend becoming payable shall, at the option of the party entitled to elect such option, be either payable in cash or applied to 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 has not elected some other option. If a policy specifies a period within which such other option may be elected, such period shall be not less than 30 days following the date on which such dividend is due and payable. The annually apportioned dividend shall be deemed to be payable in cash even though the policy provides that payment of such dividend is to be deferred for a specified period, provided that such period does not exceed six years from the date of apportionment and that interest will be added to such dividend at a specified rate. If a participating policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under such nonforfeiture provision shall be applied in the manner set forth in the policy;
    6. POLICY LOANS. A provision that after three full years' premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will loan on the execution of a proper note or loan agreement by the owner of the policy and on proper assignment of the policy and on the sole 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 cash value of the policy at the end of the current policy year and of any dividend additions thereto. The policy shall further provide that the company may deduct from such loan value or from the proceeds of the loan any existing indebtedness on or secured by the policy not already deducted in determining such cash value, including interest due or accrued and any unpaid balance of the premium for the current policy year, and that the company may collect interest in advance of the loan to the end of the current policy year. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for six months after the application therefor. The policy may also provide that if interest on any indebtedness is not paid when due it shall then be added to the existing indebtedness and shall bear interest at the same rate. The policy may provide that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value thereof, then the policy shall terminate and become void, but not until at least 30 days' notice shall have been mailed by the insurer to the last known address of the insured or policy owner; of the individual identified by the policy owner or insured as an additional contact, if any; and of any assignee of record at the home office of the insurer. The policy, at the insurer's option, may provide for an automatic premium loan, subject to an election of the party entitled to elect. No condition other than as provided in this paragraph shall be exacted as a prerequisite to any such loan. This paragraph shall not apply to term insurance or to term insurance benefits provided by rider or supplemental policy provisions or to any policy with a loan value of less than $25.00;
    7. TABLES OF OPTIONS AND VALUES. 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, reduced paid-up value, if any, and the extended term value, 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. Upon written request, the company will furnish an extension of such table beyond the year shown in the policy. Such values and benefits shall 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 insurer on the policy;
    8. REINSTATEMENT. A provision that unless the policy has been surrendered for its cash surrender value or its cash surrender value has been exhausted or unless the paid-up term insurance, if any, has expired, the policy will be reinstated at any time within three years from the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all premiums in arrears, and the payment or reinstatement of any other indebtedness to the insurer upon the policy. All such sums may bear interest not exceeding 6 percent per annum compounded annually; provided, however, that acceptance of all or any part of a premium more than 30 days in arrears by the agent or company without requiring reinstatement application shall continue the policy in force without showing any lapse of time;
    9. TITLE. On each such policy there shall be placed a title which shall briefly and accurately describe the nature and form of the policy;
      1. A provision that all premiums shall be payable in advance either at the home or district office or to any agent of the company upon delivery of a receipt signed by the agent. Such receipt shall bear the agent's license number and the signature of one or more of the officers who shall be named in the policy;
      2. In the case of weekly premium policies, there shall be a provision that while premiums on the policy are not in default beyond the grace period and upon proper notice to the insurer of the intention to pay future premiums directly to the insurer at its home office or any office designated by the insurer for the purpose, the insurer will, at the end of a period of 26 weeks from the due date of the first premium so paid and for any additional weekly premium payment thereafter, for which period such premiums are so paid continuously without default beyond the grace period, refund a stated percentage of the premiums in an amount which fairly represents the savings in collection expense.

        PAYMENT OF CLAIMS. 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 and, at the insurer's option, surrender of the policy or proof of the interest of the claimant or both. If an insurer specifies a particular period prior to the expiration of which settlement shall be made, such period shall not exceed two months from the receipt of such proofs;

        SPACE FOR NAME OF DESIGNATED BENEFICIARY. There shall be a space on the front or back page of the policy for the name of the designated beneficiary.

        CONVERSION PRIVILEGE. A provision that, upon written request and without evidence of insurability (except for any additional amount of insurance), an industrial life insurance policyholder is guaranteed the privilege of converting any industrial insurance policy to any form of ordinary life insurance with less frequent premium payments regularly issued by the insurer and is guaranteed the privilege of converting small industrial policies with the same insurer into one larger policy with combined benefits; and

        ENTIRE CONTRACT. A provision that, if any reference is made to the application for insurance or to the constitution, bylaws, or rules of the insurer as forming part of or affecting the policy between the parties, then there shall be included in or attached to said policy when issued a correct copy of the application signed by the applicant and the constitution, bylaws, and rules referred to. All statements made by the applicant in the application shall be deemed to be representations and not warranties. No statement in the application shall be used to void the policy or deny payment of a claim unless a copy of such application has been attached to and made a part of such policy when issued;

  2. Any of such required provisions or portions thereof not applicable to single premium or term policies or to provisions relating to disability benefits or to additional benefits in the event of death or dismemberment by accidental means shall to that extent not be incorporated therein.
  3. No policy of industrial life insurance shall contain any of the following provisions:
    1. A provision by which the insurer may deny liability under the policy for the reason that the insured has previously obtained other insurance from the same insurer;
    2. A provision giving the insurer the right to declare the policy void because the insured has had any disease or ailment, whether specified or not, or because the insured has received institutional, hospital, medical, or surgical treatment or attention. However, a policy may contain a provision which gives the insurer the right to declare the policy void if the insured has, within two years prior to the issuance of the policy, received institutional, hospital, medical, or surgical treatment or attention and the insured or claimant under the policy fails to show that the condition occasioning such treatment or attention was not of a serious nature or was not material to the risk. The policy may also contain a provision that the policy shall not become effective if on the date of the application for the policy the insured had knowledge that he was afflicted with any serious disease tending to shorten life, which fact was not shown on the application for the policy; or
    3. A provision giving the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right is conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer to make such contract.
  4. An exact copy of the application shall be given to the applicant at the time of the sale, which application shall disclose and contain the following information and language:
    1. An itemized list of all policies presently in force with all insurers, showing company names, premiums charged, amounts of insurance, total premiums, and total amounts of insurance provided;
    2. The premium cost of the insurance policy purchased;
    3. The premium cost for each optional additional benefit, if any, shall be shown separately and conspicuously apart from the premium charge for the basic natural death benefit; and
    4. The following statements shall appear on the applicant's copy in not less than ten-point type:
  5. Policyholders or insureds who are 65 years of age and older shall have the option to provide the name and address of a person as an additional contact to the insurer who shall also be notified by the insurer in writing by mail to the last known address of such person prior to the lapse, termination, or cancellation of any industrial life insurance policy by the insurer.

(10) P AYMENT OF PREMIUMS.

(A) "You may wish to compare the total cost of this insurance policy with your net income."

(B) "I hereby certify, as signed below, that I was given an exact copy of this application at the time this application was made to the agent of record whose signature appears below. ____________________________ Applicant's Signature" (C) "I, as the agent of record, hereby certify as signed below, that I gave the applicant, whose signature appears above, an exact copy of this application at the time this application was taken. I further certify that I have inquired of the applicant as to all policies in force and that I have listed all such policies on said application. ____________________________ Agent's Signature ____________________________ Agent's License Number"

(Code 1933, § 56-2902, enacted by Ga. L. 1960, p. 289, § 1; Code 1933, §§ 56-2902, 56-2903, enacted by Ga. L. 1981, p. 936, § 1; Ga. L. 1982, p. 3, § 33; Ga. L. 2002, p. 572, §§ 1, 2.)

Law reviews.

- For note, "Incontestability Clauses in Georgia Insurance Contracts," see 13 Ga. L. Rev. 850 (1979).

JUDICIAL DECISIONS

Insured's sibling's action when sibling was neither executor nor administrator.

- Insured's sibling was not entitled to maintain action on industrial life insurance policy containing facility of payment clause giving insurer right to make payment to any one of a designated class equitably entitled thereto, including sibling of insured, when policy named as beneficiary only executor or administrator of insured, and sibling did not show that sibling was proceeding in either capacity. Simmons v. Metropolitan Life Ins. Co., 62 Ga. App. 55, 7 S.E.2d 824 (1940).

Question of contractual capacity determined by condition of insured's mind at time the change of beneficiary form was executed; but, in determining such an issue, it is permissible to receive and consider evidence as to the state of the insured's mind for a reasonable period both before and after the transaction under investigation. Cobb v. Garner, 158 Ga. App. 110, 279 S.E.2d 280 (1981).

Evidence of convictions for driving while intoxicated irrelevant.

- Standing alone, the mere fact that the insured was intoxicated while driving a vehicle on two occasions in a previous year has no relevancy whatever on the issue of the insured's mental capacity to contract or whether the insured was under another's undue influence when the insured changed the beneficiary on the insured's life insurance policy. Cobb v. Garner, 158 Ga. App. 110, 279 S.E.2d 280 (1981).

RESEARCH REFERENCES

C.J.S.

- 44 C.J.S., Insurance, § 486 et seq.

ALR.

- Forfeiture of life or accident insurance for nonpayment of premium due to failure or neglect of one authorized by insured to pay same, 67 A.L.R. 180.

Physical condition which in itself is not within, or is expressly excluded from, the coverage of an insurance policy, a within such coverage when it results from or is directly attributable to a cause within the coverage, 108 A.L.R. 6

Apportionment of divisible surplus of insurance company between different policies, 108 A.L.R. 1212.

Constitutionality, construction, and application of statutes relating to contractual time limitation provisions of insurance policies, 112 A.L.R. 1288.

Incontestable clause of statute or policy as applicable to claims other than for death benefits, 121 A.L.R. 1437; 147 A.L.R. 1015.

Burden of proof in action upon accident policy, or accident feature of life policy, as to whether injury or death was result of antecedent disease or other abnormal bodily or mental condition, 144 A.L.R. 1416.

Right of insurer to restitution of payments made under mistake, 167 A.L.R. 470.

Change of beneficiary in old line insurance policy as affected by failure to comply with requirements as to manner of making change, 19 A.L.R.2d 5.

Incontestability clause as precluding insurer from defending on ground of particular clause in life policy limiting or precluding insurer's liability because of other life insurance, 22 A.L.R.2d 809.

Misrepresentation as to employer- employee relationship as within incontestability clause of group insurance, 26 A.L.R.3d 632.


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