Individuals who have purchased life insurance in New York are protected by certain provisions of New York’s insurance law, so that policies cannot be canceled or payment denied for failure to pay the premiums on time without the insurance company providing adequate notice. If the proper notice is not provided, the policyholder has the benefit of a one-year grace period during which the policyholder can pay the amount owed and the policy claim cannot be denied. Section 3211(a)(1) of New York Insurance Law requires that for policies for which premiums are paid annually, semi-annually, or quarterly, any notice that the policy will be canceled due to non-payment must be sent “at least fifteen and not more than forty-five days prior to the day when such payment becomes due . .” The notice must provide the following details:
- The notice must be mailed to the last known address of the policyholder (or any other person designated to receive notice on behalf of the policyholder); and
- The notice must state the amount due, date due, place to where and person to whom the payment is payable; and
- The notice must specify that if the payment is not made within the given time frame or the specified grace period thereafter, the policy will terminate or lapse.
Section 3211(b)(1), (2). If an insured who lives in New York receives notice from an insurance company that a life insurance policy has been cancelled due to non-payment, the policyholder should investigate whether the initial notice of premium due complied with the procedures outline above. For example, if the notice was sent only 10 days before the payment was due and the insurer cancelled the policy for non-payment, the insured could challenge the cancellation because the notice did not comply with the statute. As long as the insured sought to cure the default by paying any outstanding premiums owed within the one-year grace period, the insurer would have to reinstate the policy. If the insured dies within that one-year grace period, the insurer would have to pay the claim. Note that without the benefit of this grace period, the insurance company may offer the policyholder the opportunity to have the policy reinstated but can require the insured to undergo new medical underwriting. In other words, the insurer would have another opportunity to review the insured’s medical history and could decide not to re-issue the policy or to charge a higher premium than before. If the insured’s health has declined since originally obtaining the life insurance, the new coverage may be more expensive or provide a lower benefit than under the policy as originally issued. Thus, the one-year grace period provided by Section 3211 protects the insureds from losing affordable life insurance coverage. Trief & Olk recently obtained the full $1 million owed under a life insurance policy issued by Protective Life Insurance to a New York resident when the notice was mailed 11 days prior to the date the premium was due. Because the insured had recently moved, the notice apparently did not reach him prior to the date the payment was due. He eventually received a follow-up notice after the policy had been cancelled and tried to have the policy reinstated but the insurer undertook new medical underwriting, which had not been completed by the time the insured passed away. The beneficiaries sought our firm’s assistance and after a close review of the documents, we recognized that the premium notice had been sent 11 days from the due date, which was outside the timeframe provided by the statute. After we demonstrated non-compliance with New York law, Protective Life Insurance agreed that the premium notice did not comply with Section 3211 and agreed to pay the policy proceeds in full, along with the interest that had accrued since the death.
