State of Illinois
92nd General Assembly
Legislation

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92_HB2554

 
                                               LRB9202146JSpc

 1        AN ACT concerning payment of insurance claims.

 2        Be  it  enacted  by  the People of the State of Illinois,
 3    represented in the General Assembly:

 4        Section 5.  The Illinois Insurance  Code  is  amended  by
 5    changing Sections 224 and 357.9a as follows:

 6        (215 ILCS 5/224) (from Ch. 73, par. 836)
 7        Sec. 224.  Standard provisions for life policies.)
 8        (1)  After the first day of July, 1937, no policy of life
 9    insurance  other than industrial, group or annuities and pure
10    endowments with or without return of premiums or of  premiums
11    and  interest,  may  be  issued  or  delivered in this State,
12    unless  such  policy  contains  in  substance  the  following
13    provisions:
14        (a)  A provision that all premiums after the first  shall
15    be  payable  in  advance  either  at  the  home office of the
16    company or to an agent of the company,  upon  delivery  of  a
17    receipt  signed  by  one or more of the officers who shall be
18    designated in the policy, when such receipt is  requested  by
19    the policyholder.
20        (b)  A  provision that the insured is entitled to a grace
21    period either of 30 days or of one  month  within  which  the
22    payment  of  any premium after the first may be made, subject
23    at the option of the company to an  interest  charge  not  in
24    excess  of  6%  per  annum  for  the  number of days of grace
25    elapsing before the payment  of  the  premium,  during  which
26    period  of  grace  the policy shall continue in force, but in
27    case the policy becomes  a  claim  during  the  grace  period
28    before  the overdue premium is paid, or the deferred premiums
29    of the current policy year, if any, are paid, the  amount  of
30    such  premium  or  premiums  with  interest  thereon  may  be
31    deducted in any settlement under the policy.
 
                            -2-                LRB9202146JSpc
 1        (c)  A  provision  that  the  policy,  together  with the
 2    application therefor, a copy of which shall be endorsed  upon
 3    or  attached  to  the  policy  and made a part thereof, shall
 4    constitute the entire contract between the parties  and  that
 5    after it has been in force during the lifetime of the insured
 6    a  specified  time,  not later than 2 years from its date, it
 7    shall be incontestable except for nonpayment of premiums  and
 8    except  at  the  option  of  the  company,  with  respect  to
 9    provisions  relative  to  benefits  in the event of total and
10    permanent disability, and provisions which  grant  additional
11    insurance  specifically  against death by accident and except
12    for violations of the conditions of the  policy  relating  to
13    naval  or military service in time of war or for violation of
14    an express condition, if any, relating to  aviation,  (except
15    riding  as  a  fare-paying passenger of a commercial air line
16    flying  on  regularly  scheduled  routes  between  definitely
17    established airports) in which  case  the  liability  of  the
18    company  shall be fixed at a definitely determined amount not
19    less than the full reserve for the policy  and  any  dividend
20    additions; provided that the application therefor need not be
21    attached  to or made a part of any policy containing a clause
22    making the policy incontestable from date of issue.
23        (d)  A provision that if it is found at any  time  before
24    final settlement under the policy that the age of the insured
25    (or  the age of the beneficiary, if considered in determining
26    the premium) has been misstated, the amount payable under the
27    policy shall be such as the premium would have  purchased  at
28    the correct age or ages, according to the company's published
29    rate at date of issue.
30        (e)  A   provision  that  the  policy  shall  participate
31    annually in the surplus of the company  beginning  not  later
32    than  the  end  of  the  third  policy  year;  and any policy
33    containing provision for annual  participation  beginning  at
34    the  end of the first policy year, may also provide that each
 
                            -3-                LRB9202146JSpc
 1    dividend be paid subject to the payment of the  premiums  for
 2    the  next  ensuing  year;  and  the  insured under any annual
 3    dividend policy shall have the right each year  to  have  the
 4    dividend arising from such participation either paid in cash,
 5    or  applied  in  reduction  of  premiums,  or  applied to the
 6    purchase of paid-up  additional  insurance,  or  be  left  to
 7    accumulate to the credit of the policy, with interest at such
 8    rate  as  may be determined from time to time by the company,
 9    but not less than a guaranteed minimum rate specified in  the
10    policy,  and  payable  at  the  maturity  of  the policy, but
11    withdrawable on any anniversary date, subject to such further
12    provisions  as  the  policy   may   provide   regarding   the
13    application  of  dividends toward the payment of any premiums
14    unpaid at the end of the grace period;  and  if  the  insured
15    fails to notify the company in writing of his election within
16    the  period  of grace allowed for the payment of premium, the
17    policy shall  further  provide  which  of  such  options  are
18    effective.
19        (f)  A  provision that after the policy has been in force
20    3 full years the company at any time, while the policy is  in
21    force,  will  advance,  on proper assignment or pledge of the
22    policy and on the  sole  security  thereof,  at  a  specified
23    maximum fixed or adjusted rate of interest in accordance with
24    Section  229.5,  a  sum  equal  to,  or  at the option of the
25    insured less than the amount required by Section 229.3  under
26    the  conditions  specified  thereby  and with notification as
27    required by Section 229.5; and that the company  will  deduct
28    from such loan value any indebtedness not already deducted in
29    determining  such value and any unpaid balance of the premium
30    for the current policy year,  and  may  collect  interest  in
31    advance  on  the  loan to the end of the current policy year;
32    and any policy may also provide that if the interest  on  the
33    loan  is  not paid when due it shall be added to the existing
34    loan and shall bear interest at the same rate.  No  condition
 
                            -4-                LRB9202146JSpc
 1    other  than as provided herein or in Sections 229.3 and 229.5
 2    shall be exacted as a prerequisite to any  such  loan.   This
 3    clause shall not apply to term insurance.
 4        (g)  A  provision  for  nonforfeiture  benefits  and cash
 5    surrender values  in  accordance  with  the  requirements  of
 6    paragraph (1) of Section 229.1 or, Section 229.2.
 7        (h)  A  table  showing in figures the loan values and the
 8    options available under the policy each year, upon default in
 9    premium payments, during at least the first 20 years  of  the
10    policy;  the  policy  to contain a provision that the company
11    will furnish upon request an extension of such  table  beyond
12    the years shown in the policy.
13        (i)  A  provision  that  in  event  of default in premium
14    payments the value of the policy is applied to  the  purchase
15    of  other  insurance as provided in this Section, and if such
16    insurance  is  in  force  and  the  original  policy  is  not
17    surrendered to the company and cancelled, the policy  may  be
18    reinstated within 3 years from such default, upon evidence of
19    insurability  satisfactory  to  the  company  and  payment of
20    arrears of premiums and the payment or reinstatement  of  any
21    other  indebtedness  to  the  company  upon  the policy, with
22    interest on the premiums at a rate not exceeding 6% per annum
23    payable annually and with interest on the indebtedness  at  a
24    rate not exceeding the rate prescribed by Section 229.5.
25        (j)  A  provision  that  when  a policy is a claim by the
26    death of the insured settlement shall be made upon receipt of
27    due proof of death and not later  than  2  months  after  the
28    receipt of such proof.
29        (k)  If  the  policy provides for payment of its proceeds
30    in installments, a table showing the  amount  and  period  of
31    such installments shall be included in the policy.
32        (l)  Interest   shall  accrue  on  the  proceeds  payable
33    because of the death of the insured, from date of  death,  at
34    the  rate  of  9%  6% on the total amount payable or the face
 
                            -5-                LRB9202146JSpc
 1    amount if payments are to be made in installments  until  the
 2    total payment or first installment is paid, unless payment is
 3    made within fifteen (15) days from the date of receipt by the
 4    company  of due proof of loss. This provision need not appear
 5    in  the  policy,  however,  the  company  shall  notify   the
 6    beneficiary  at  the  time  of  claim of this provision.  The
 7    payment of interest shall apply to all policies now in force,
 8    as well as those written after the  effective  date  of  this
 9    amendment.
10        (m)  Title  on  the  face  and  on the back of the policy
11    briefly describing its form.
12        (n)  A provision, or a notice attached to the policy,  to
13    the effect that during a period of ten days from the date the
14    policy   is   delivered  to  the  policy  owner,  it  may  be
15    surrendered to the insurer together with  a  written  request
16    for cancellation of the policy and in such event, the insurer
17    will  refund  any premium paid therefor, including any policy
18    fees or other  charges.  The  Director  may  by  rule  exempt
19    specific  types  of  policies  from  the requirements of this
20    subsection.
21        (2)  In the case of the replacement of life insurance, as
22    defined  in  the  rule  promulgated  by  the  Director,   the
23    replacing  insurer shall either (1) delay the issuance of its
24    policy for not less  than  20  days  from  the  date  it  has
25    transmitted  a policy summary to the existing insurer, or (2)
26    provide in a form titled  "Notice  Regarding  Replacement  of
27    Life  Insurance",  as well as in its policy, or in a separate
28    notice delivered with the policy, that the  insured  has  the
29    right  to  an  unconditional refund of all premiums paid, and
30    that such right may be exercised within a period of  20  days
31    commencing  from  the  date of delivery of such policy. Where
32    option (2) is exercised, the  replacing  insurer  shall  also
33    transmit  a  policy  summary to the existing insurer within 3
34    working days after the date the replacement policy is issued.
 
                            -6-                LRB9202146JSpc
 1        (3)  Any of the foregoing provisions or portions  thereof
 2    not  applicable to single premium or nonparticipating or term
 3    policies shall to that extent not  be  incorporated  therein.
 4    This  Section  shall not apply to policies of reinsurance nor
 5    to policies issued or granted pursuant to  the  nonforfeiture
 6    provisions prescribed in subparagraph (g) of paragraph (1) of
 7    this Section.
 8    (Source: P.A. 83-598.)

 9        (215 ILCS 5/357.9a) (from Ch. 73, par. 969.9a)
10        Sec.   357.9a.  Delay  in  payment  of  claims.  Periodic
11    payments of accrued  indemnities  for  loss-of-time  coverage
12    under  accident  and health policies shall commence not later
13    than 30 days after the receipt by the company of the required
14    written proofs  of  loss.  An  insurer  which  violates  this
15    Section  if  liable  under  said  policy,  shall  pay  to the
16    insured, in addition to any other  penalty  provided  for  in
17    this  Code,  interest  at the rate of 9% 8 per cent per annum
18    from the 30th day after receipt of such proofs of loss to the
19    date of late payment of  the  accrued  indemnities,  provided
20    that  interest  amounting to less than one dollar need not be
21    paid.
22    (Source: P.A. 79-792.)

23        Section 99.  Effective date.  This Act takes effect  upon
24    becoming law.

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