The Office of General Counsel issued the following informal opinion on February 23, 2001, representing the position of the New York State Insurance Department.
RE: Disability Income Benefit Period
May a disability income rider provide a benefit period that falls below the ten year/age 65 requirement contained in C. L. 1963-4?
Although the language in the C. L. 1963-4 requires a ten year/age 65 benefit period, this does not appear to be required by statute, nor does public policy seem to mandate it.
A fraternal benefit society submitted disability income riders with maximum benefit periods of one or two years to the Life Bureau for review. The Life Bureau closed the file because the riders "fail to comply with the requirement in Circular Letter 4 of 1963 IV. A.11. that the benefit must continue for a specified period of no less than 10 years or to age 65 and, as such, is unapprovable."
Subsequently, the society, in response to C. L. 2000-18, asked that this provision be deleted from C. L. 1963-4. The society believes that advances in medicine and changes in the workforce have made this provision obsolete and unnecessarily limits consumer choice. (The society points out that advances in medicine have shortened the period of disability, that there has been an increase in two-working-member households, and suggests conspicuous disclosure on the cover page of the rider to advise consumers of the benefit period.)
C.L. 1963-4 IV. A. 11. provided that: "Income benefits for a specified period such as 10 years or to age 65 are not properly included in an individual life contract." In 1969, the Department issued C. L. 1969-2 that substituted a new guideline providing that: "Income benefits for a specified period of no less than 10 years or to age 65 may properly be included in an individual life contract." C. L. 1969-2 has been superseded by N. Y. Comp. Codes R. & Regs. tit. 11, § 52 et. seq. (1983) for health insurance. However, the riders in question are part of a life insurance policy and consequently, the Life Bureau continues to apply the revised guideline.
In its review of these riders the Life Bureau looks to N. Y. Ins. Law § 3215 (McKinney 2000). There is no language in that section that mandates this minimum benefit period requirement. Moreover, a further examination of the guideline failed to reveal any overriding policy consideration that would require the Department to apply the minimum benefit period requirement contained in C. L. 1963-4 to the disability income riders in question. The bureau pointed out that policies with these types of riders are written very infrequently. The more common provision is a waiver of premium in the case of disability.
The Department will consider the deletion of this guideline in its continuing review of Circular Letters. In the meantime, the Department will not object to the issuance of a disability income rider solely because the benefit period does not comply with the guideline contained in C. L. 1963-4.
For further information you may contact Deputy General Counsel Susan Donnellan at the New York City Office.