No policy of group life insurance may be delivered in this State unless it contains in substance the following provisions or provisions which in the opinion of the director or his designee are more favorable to the persons insured or at least as favorable to the persons insured and more favorable to the policyholder. However, (a) items (6) to (11), inclusive, do not apply to policies issued to a creditor, (b) the standard provisions required for individual life insurance policies do not apply to group life insurance policies, and (c) if the group life insurance policy is on a plan of insurance other than the term plan, it shall contain a nonforfeiture provision which in the opinion of the director or his designee is equitable to the insured persons and to the policyholder, but nothing may be construed in this section to require that group life insurance policies contain the same nonforfeiture provisions as are required for individual life insurance policies:

(1) A provision that the policyholder is entitled to a grace period of thirty-one days for the payment of any premium due except the first, during which grace period the death benefit coverage continues in force, unless the policyholder has given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder is liable to the insurer for the payment of a pro rata premium for the time the policy was in force during the grace period.

(2) A provision that the validity of the policy may not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue and that no statement made by any person insured under the policy relating to his insurability may be used in contesting the validity of the insurance with respect to which the statement was made after the insurance has been in force before the contest for a period of two years during the person's lifetime nor unless it is contained in a written instrument signed by him.

(3) A provision that a copy of the application, if any, of the policyholder must be attached to the policy when issued, that all statements made by the policyholder or by the persons insured are considered representations and not warranties and that no statement made by any person insured may be used in any contest unless a copy of the instrument containing the statement is or has been furnished to the person or his beneficiary.

(4) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage.

(5) A provision specifying an equitable adjustment of premiums or of benefits, or of both, to be made in the event the age or sex of a person insured has been misstated. The provision shall contain a clear statement of the method of adjustment to be used.

(6) A provision that any sum becoming due by reason of the death of the person insured is payable to the beneficiary designated by the person insured, subject to the provisions of the policy in the event there is no designated beneficiary, as to all or any part of the sum, living at the death of the person insured and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of the sum not exceeding two thousand dollars to any person appearing to the insurer to be entitled equitably thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured.

(7) A provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable and the rights and conditions set forth in items (8), (9), and (10) of this section.

(8) A provision that if the insurance or any portion of it on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy that person is entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits so long as application for the individual policy is made and the first premium paid to the insurer within thirty-one days after the termination and so long as the following conditions are met:

(a) The individual policy is, at the option of the individual, on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for the amount applied for.

(b) The individual policy is in an amount not in excess of the amount of life insurance which ceases because of the termination, less, in the case of a person whose membership in the class or classes eligible for coverage terminates but who continues in employment in another class, the amount of any life insurance for which the person is or becomes eligible under any other group policy within thirty-one days after the termination. Any amount of insurance which has matured on or before the date of the termination as an endowment payable to the person insured, whether in one sum or in installments or in the form of an annuity, is not, for the purposes of this provision, included in the amount which is considered to cease because of the termination.

(c) The premium on the individual policy is at the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which the person then belongs, and to his age attained on the effective date of the individual policy.

(9) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of the termination whose insurance terminates and who has been so insured for at least five years before the termination date is entitled to have issued to him by the insurer an individual policy of life insurance, subject to the same conditions and limitations as are provided by item (8) of this section, except that the group policy may provide that the amount of the individual policy may not exceed the smaller of:

(a) the amount of the person's life insurance protection ceasing because of the termination or amendment of the group policy, less the amount of any life insurance for which he is or becomes eligible under any group policy issued or reinstated by the same or another insurer within thirty-one days after the termination; and

(b) ten thousand dollars.

(10) A provision that if a person insured under the group policy dies during the period within which he would have been entitled to have an individual policy issued to him in accordance with item (8) or (9) and before the individual policy has become effective the amount of life insurance which he would have been entitled to have issued to him under the individual policy is payable as a claim under the group policy, whether or not application for the individual policy or the payment of the first premium therefor has been made.

(11) Where active employment is a condition of insurance, a provision that an insured may continue coverage during the insured's total disability by timely payment to the policyholder of that portion, if any, of the premium that would have been required from the insured had total disability not occurred. Unless otherwise provided by law, the continuation must be on a premium-paying basis for a period of six months from the date on which the total disability started, but not beyond the earlier of:

(a) approval by the insurer of continuation of the coverage under any disability provision which the group insurance policy may contain; or

(b) the discontinuance of the group insurance policy.

(12) In the case of a policy issued to a creditor, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a certificate of insurance describing the coverage and specifying that the death benefit first must be applied to reduce or extinguish the indebtedness.

HISTORY: Former 1976 Code Section 38-31-10 [1953 (48) 493; 1956 (49) 2146; 1962 Code Section 37-307] recodified as Section 39-65-210 by 1987 Act No. 155, Section 1; 1988 Act No. 333, Section 4; 1993 Act No. 181, Section 735.