20 4. An agent or insurer may not recommend replacement or certain changes to a policy using materially inaccurate presentations or comparisons of an existing contract’s premiums and benefits or dividends and values, if any, or recommends that an insured 65 years of age or older purchase an unnecessary replacement annuity. CIC 10509.8. 5. A life insurer shall provide to all prospective insureds a buyer’s guide prior to accepting the applicant’s initial premium or premium deposit. However, if the policy for which application is made contains an unconditional refund provision of at least 10 days, the buyer’s guide shall be delivered with the policy or prior to delivery of the policy. CIC 10509.975. 6. Every policy of individual life insurance shall have a notice stating that after receipt of the policy by the owner, the policy may be returned by the owner for cancellation by delivering it or mailing it to the insurer or to the agent through whom it was purchased. This period shall not be less than 10 days nor more than 30 days. CIC 10127.9. Senior citizens must be given a notice printed on or attached to the policy indicating a period of no less than 30 days for an individual life insurance and individual annuity contract after receipt of the policy by the owner, the policy may be returned by the owner for cancellation and a full refund. CIC 10127.10. (a). Discuss the free look period with your agent or insurer before purchasing a life insurance policy. If the transaction involves a replacement policy the replacing insurer shall provide in its policy or in a separate written notice which is delivered with the policy that the applicant has a right to an unconditional refund of all premiums paid within a period of 30 days commencing from the date of delivery of the policy. CIC 10509.6. (d). Show
Made with FlippingBook RkJQdWJsaXNoZXIy Mjk0ODI1 Generally, an insurer need not investigate statements made in an application for insurance, subject to certain exceptions. Instead, the potential policyholder or applicant must fully disclose all known material information. If a potential insured does not correctly disclose information on an application (even innocently), the insurer may later try to rescind the insurance policy. When an insurer “rescinds” a policy, it renders the contract as if
it never existed and frees both parties from their obligations under the contract. Practically, this means that the insurance company is no longer obligated to pay the claims for life insurance, accident insurance, health insurance, long-term care insurance or long-term disability insurance benefits and the policyholder no longer has to pay the policy’s premiums. Insurers often look for ways to rescind insurance policies so they can deny insurance claims. When can an insurer
rescind? “But I told the insurance agent when I applied
for the policy…” Regardless, in practice, the broker vs. insurance agent distinction becomes particularly important when an insurer attempts to rescind a policy based on a material misrepresentation on the initial application, i.e., a failure to disclose pertinent medical or lifestyle history. Occasionally, a potential insured will make accurate disclosures to the insurance agent or broker as part of the application process, but the agent or broker will tell the potential insured that such disclosure on the application is unnecessary. Depending on whether the insurance agent is treated as an agent of the insurer, knowledge of the misrepresentation, and consequent liability, will be imputed differently. O’Riordan v. Federal Kemper Life Assurance
Ms. O’Riordan answered “no” to both questions on the application, although she apparently told the insurance agent that she was a former smoker and “might have had a couple of cigarettes in the last couple of years.” In response, the insurance agent assured Ms. O’Riordan “[t]hat’s not really what they’re looking for. They’re looking for smokers.” Several years later, Ms. O’Riordan died of breast cancer. When her husband attempted to collect the death benefits under the policy, the insurer attempted to rescind. The insurer conducted an investigation and found that Ms. O’Riordan’s physician, a year before she applied for the policy and within the thirty-six-month period, noted her request for a nicotine patch. The physician’s report said that, although she quit smoking years earlier, “recently due to some stressors, she did start to smoke a little bit again, but is not smoking as much as she smoked previously.” On this basis, the insurer rescinded the policy and refused to pay the death benefits to Mr. O’Riordan. Mr. O’Riordan filed a lawsuit and the case made it all the way to the California Supreme Court. Ultimately, the Court determined that Ms. O’Riordan’s disclosure to the insurance agent raised an issue as to whether the insurer could rescind the policy. If the agent was acting as an agent of the insurer, then the agent’s knowledge of Ms. O’Riordan’s disclosures of a past history of smoking would be imputed to the insurer. In other words, because the agent knew, the insurance company had constructive knowledge of the disclosure. Thus, despite the fact that the agent had not actually communicated Ms. O’Riordan’s history of smoking to the insurer, the court still reversed the lower court opinion and allowed Mr. O’Riordan’s case to proceed since the insurer could not rescind the policy. Insurers often use rescission of insurance policies to deny insurance claims, especially life, disability and health claims. Most policyholders do not understand their rights and assume insurers can rescind their policies. If you are a victim of an insurer’s attempt to rescind your life, health or disability insurance policy, do not cash the insurer’s check for premium refund until you call McKennon Law Group PC to assess your rights to fight this type of abusive insurance company practice. You may be able to sue your insurer for breach of contract and breach of the implied covenant of good faith and fair dealing (insurance bad faith) for attempting to rescind your valuable insurance policy. The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of law. To speak to a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949)387-9595 for a free consultation or complete the free consultation form on the firm’s website. What provision would allow the insured to return the policy for a full premium refund?Term insurance policies can also have a Return of Premium (ROP) feature which refunds part or all of the premiums paid at the end of a level term period if death benefits are not paid out. Policies with this feature are more expensive because the policyholder has the ability to receive cash back.
What rule lets a policyowner return a policy for a refund of premiums paid for a certain period of time after the policy is issued?During the free look period, the contract holder can decide whether or not to keep the insurance policy; if they are not satisfied and wish to cancel, the policy purchaser can receive a full refund.
How many days must the insurer refund all premiums and policy fees?Refund any premiums and policy fees within 30 days of notice if the policy is within the cancelation period specified by the insurer. Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase a new insurance?
Which of the following ensures have a right to cancel an individual life policy for a full refund within 30 days of policy delivery?Which of the following insureds has a right to cancel an individual life policy within 30 days? An insured has the right to cancel a policy by written notification to the insurer. This notification may be mailed to the insurer or returned to the original agent who made the sale.
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