HOUSE BILL REPORT

SSB 6319

BYSenate Committee on Financial Institutions and Insurance (originally sponsored by Senators von Reichbauer, Moore, Rasmussen, Kiskaddon and Zimmerman; by request of Insurance Commissioner)

Authorizing notice to certain life insurance policyowners of the nonforfeiture benefits available.

Majority Report:  Do pass with amendment.  (13)

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Anderson, Betrozoff, Chandler, Crane, Day, Dellwo, Dorn, P. King, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

FEBRUARY 22, 1988

BACKGROUND:

Life insurance policies, other than most term life insurance policies, contain provisions offering the policyholder a choice of non-forfeiture values. Essentially, a non-forfeiture value is the worth of a policy if and when the policyholder decides to cancel or otherwise stop paying premiums on the policy.

The basic type of non-forfeiture value is the cash surrender value, the amount of money that will be paid to the policyholder if he or she stops paying premiums. Two other common non-forfeiture benefits are extended term insurance and reduced paid-up insurance. Extended term insurance provides continued life insurance up to the face amount of the policy for a limited period of time. Reduced paid-up insurance enables the policyholder to obtain a policy for a reduced amount of insurance for life without the necessity of paying any additional premiums.

Many types of insurance policies permit the policyholder to exercise non-forfeiture benefit options upon the attainment of a specified age.

SUMMARY:

BILL AS AMENDED:  Insurance companies must inform the policyowner at least once every five years in writing of the nonforfeiture options that may be available under the policy.  The information must generally describe nonforfeiture options and recommend that the policyowner contact his or her agent for further information.  The notice requirements do not apply to policies providing only term insurance.

AMENDED BILL COMPARED TO SUBSTITUTE:  Under the substitute bill life insurers could voluntarily inform policyowners, in writing, on or before the policy anniversary date following an insured's attainment of age 60, of the non-forfeiture benefits available under the policy.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.