Section 2002.APPENDIX A   Guidelines

Section 2002.ILLUSTRATION U   Guideline to Section 2002.80

a)         This Section imposes the same disclosure standards with respect to policy provisions relating to renewability, cancelability and termination, modification of benefits, losses or premiums because of age or otherwise as stated in ILLUSTRATION O.  The comments in that Illustration are equally applicable to this Section.

b)         Advertisements of cancelable policies must state that the contract is cancelable or renewable at the option of the company as the case may be.  For example, the following represent illustrations:  A policy which is cancelable shall be advertised in a manner similar to "This policy can be cancelled by the company at any time"; a policy which is renewable at the option of the insurance company shall be advertised in a manner similar to "This policy is renewable at the option of the company" or "The company has the right to refuse renewal of this policy" or "Renewable at the option of the insurer."  Advertisements of such policies must indicate that the insurer has the right to increase premium rates.

c)         With respect to non-cancelable policies and guaranteed-renewable policies, the Part requires that a summary of the policy provisions with respect to renewability must be set forth and defined where appropriate.  The disclosure of provisions relating to renewability requires the use of language such as "non-cancelable," "non-cancelable and guaranteed renewable," or "guaranteed renewable."

d)         The Part also requires a statement of the qualifying conditions which constitute limitations of the permanent nature of the coverage.  These customarily fall into three categories:  age limits, reservation of right to increase premiums and the establishment of aggregate limits.  For example, "non-cancelable and guaranteed renewable" does not fulfill the requirement of the Part if the policy contains a terminal age of 65.  In such a case, a proper statement would be "non-cancelable and guaranteed renewable to age 65."  If a guaranteed renewable policy reserves the right to increase premiums, the statement must be expanded into language similar to "guaranteed renewable to age 65, but the company reserves the right to increase premium rates on a class basis."  A policy may have one or more of the three basic limitations and an advertisement must describe each of those which the policy contains. Most new individual policy issues are guaranteed renewable; therefor, the fact that a policy is guaranteed renewable shall not be exaggerated.

e)         This Part also requires the disclosure of any modification of benefits or losses covered because of age or for other reasons.  Provisions for reduction of benefits at stated ages must be set forth.  For example, a policy may contain a provision which reduces benefits 50% after age 60 although it is renewable to age 65.  Such a reduction would have to be set forth.  Also, a provision for the elimination of certain hazards at any specific ages or after the policy has been in force for a specified time would have to be set forth.

f)         An advertisement for a policy which provides for step-rated premium rates based upon the policy year of the insured's attained age must disclose such rate increases and the times or ages at which such premiums increase.

g)         This Section requires that the qualifying conditions of renewability must be disclosed in a manner which does not minimize or render obscure the qualifying conditions of renewal.