New York Laws
Article 42 - Life Insurance Companies and Accident and Health Insurance Companies and Legal Services Insurance Companies
4220 - Life Insurance and Annuities; Nonforfeiture Benefits Under Defaulted Contracts.

(2) Except as otherwise provided in this chapter, in the event of
default in payment of a premium or a note therefor or any interest on
such note, after three full years' premiums have been paid on a policy
of life insurance issued by a domestic insurance company on or after
January first, nineteen hundred forty, such company, upon surrender of
such policy within the period of three months from the due date of the
payment in default, shall pay to the person entitled thereto a cash
surrender value not less than the excess, if any, of subparagraph (A)
over subparagraph (B) as follows:
(A) The reserve on the policy at the due date of the premium in
default (including the reserve for any paid-up additions thereto and
excluding the reserve for any additional benefits in the event of death
by accident or for benefits in the event of total and permanent
disability or for any continuous instalment payments to the beneficiary
or to the insured and the beneficiary incidental to the life insurance
benefit), determined on the basis, in accordance with section four
thousand two hundred seventeen of this article, specified in the policy,
and in addition to such reserve, the amount of any dividends standing to
the credit of the policy;
(B) the sum of any indebtedness to the company on the policy,
including interest due or accrued, and a surrender charge equal to two
and one-half per centum of the face amount of such policy and of any
paid-up additions thereto, and if the policy be surrendered within the
period above specified and after the expiration of the grace period, if
any, following the due date of the payment in default, then there may be
added to the sum to be deducted the value of any extended term insurance
granted (determined as hereinafter specified) during the period between
the expiration of the grace period and the date of surrender of the
policy.
(3) The person entitled to such cash surrender value may, upon demand
therefor within three months after the due date of the payment in
default, elect to receive in lieu of such cash surrender value either
extended term insurance (including pure endowment benefits, if any) or
reduced paid-up insurance under the policy, for a term, in the case of
extended term insurance, and for an amount, in the case of reduced
paid-up insurance, which, in either case, shall be not less than that
provided by applying such cash surrender value at the date of default to
provide such extended term or paid-up insurance, computed at net rates
at the attained insurance age of the insured and on the same basis used
for the computation of such cash surrender value, except that in the
case of policies issued on a substandard basis or policies for which the
reserves are computed upon the American Men Ultimate Table of Mortality,
the term of such extended insurance may be computed upon rates of
mortality not greater than one hundred thirty per centum of those shown
by the table specified in the policy for the computation of the reserve.
The period of extended term insurance shall date from the due date of
the premium in default. Reduced paid-up insurance shall be participating
if the policy be participating.
(4) The amount of the extended term insurance shall be not less than
the amount of life insurance under the policy as expressed in the policy
with the approval of the superintendent (including any paid-up additions
thereto and excluding any additional benefits on account of death by
accident or any continuous instalment payments to the beneficiary or to
the insured and the beneficiary incidental to the life insurance

benefit), decreased by the amount of any indebtedness to the company on
the policy, including interest due or accrued. In the case of any
endowment life insurance policy, if the sum used to provide extended
term insurance shall be more than sufficient to continue the insurance
to the end of the endowment period, the excess shall be used to provide
a pure endowment benefit at the end of the endowment period.
(5) Extended term insurance and reduced paid-up insurance may exclude
additional benefits in the event of death by accident and benefits in
the event of total and permanent disability, and extended term insurance
may be without participation in surplus and without the right to loans.
(6) If no other option expressed in the policy be so selected by such
person within three months after the due date of the premium in default,
the amount of such nonforfeiture value shall be applied to continue the
insurance in force from the due date of the premium in default as
extended term insurance as hereinbefore provided.
(7) The policy shall specify the reserve basis used in determining
nonforfeiture benefits and cash surrender values.
(8) This subsection shall not apply to any pure endowment, annuity, or
reversionary annuity contract, nor to any term insurance of thirty years
or less.
(9) In the case of ordinary or industrial life insurance policies
issued on a substandard basis the company shall not be required to
provide extended term insurance as a nonforfeiture benefit.
(10) That the company must provide, to any policyowner who so requests
in writing, within twenty business days from the date the written
request is received by the company, a statement of the cash surrender
value of the policy.
(b) (1) Every contract issued after January first, nineteen hundred
forty, by any domestic life insurance company which provides for a
deferred annuity on the life of the insured or of the annuitant, or for
a pure endowment contract, except a contract paid for by a single
premium, shall provide that if the contract after having been in force
for three full years, shall by its terms lapse or become defaulted
because any stipulated payment to the company shall not have been made,
the reserve on such contract, computed according to the standard adopted
by such company pursuant to section four thousand two hundred seventeen
of this article, shall, after deducting a surrender charge not to exceed
the limits hereinafter specified, and after deducting the amount of the
unpaid balance, including interest due or accrued, on any loans on such
contract by the company, be applied as a net single premium according to
such standard, for the purchase of a paid-up annuity or pure endowment
contract, which shall be payable by the company under the same terms and
conditions, except as to amount, as the original contract.
(2) The surrender charge to be deducted pursuant to paragraph one
hereof shall not exceed the greater of the following amounts:
(A) thirty-five percent of the gross annual stipulated payment
required by the holder of such contract by the terms thereof; or
(B) twenty-five dollars per one hundred dollars a year income provided
by the contract at the normal retirement age.
(3) If such contract provides for a cash surrender value at the option
of the holder of such contract and in lieu of such paid-up annuity or
pure endowment contract, such cash surrender value shall be an amount at
least equal to such net single premium and shall be payable to the
holder of such contract upon demand therefor and the surrender of such
contract within ninety days after the date of lapse or default.
(4) The paid-up annuity or pure endowment contract prescribed by this
section shall not include additional benefits in the event of accidental
death or benefits in the event of total and permanent disability and, at

the option of the insurer, may be without future participation in
surplus and without the right to loans.
(c) The company may provide in any policy or contract that the payment
of any cash surrender value may be deferred for not exceeding six months
after demand therefor with surrender of the policy or contract as
provided above, and the amount payable shall bear interest during any
such deferred period of thirty days or more at the rate specified in the
policy for the computation of the reserve.
(d) The surrender value and other nonforfeiture benefits of any lapsed
or defaulted policy of life insurance or annuity contract issued by any
domestic life insurance company before January first, nineteen hundred
forty shall be determined in accordance with the law applicable at the
date of issuance of such policy or contract.
(e) No foreign or alien life insurance company shall deliver or issue
for delivery in this state any policy of life insurance or any annuity
or pure endowment contract which does not contain the provisions
required by subsection (a) or (b) hereof, as the case may be, or
provisions which, in the opinion of the superintendent, are at least
equally favorable to policyholders.