Latest News

The following are content additions to supplement your existing text unless otherwise indicated:

LIFE

Life Insurance Basics

A. Individual Underwriting by the Insurer

2. Unfair Discrimination

It is illegal to refuse to issue or renew a life insurance policy on the life of an individual based on the individual’s

Federal Tax Considerations for Life Insurance and Annuities

A. Taxation of Personal Life Insurance

Cost Recovery Rule

Cost recovery rule is the general rule for taxation of lump-sum surrender value payments on life insurance policies under which the amount included in the policyowner's income upon policy surrender is the excess of the gross proceeds received over the cost basis. If the policyowner withdraws any of the cash value or surrenders the policy for the cash value, the amount of cash value that exceeds the sum of the total premiums paid will be taxed to the policyowner as ordinary income.

Insurance Regulation – LIFE AND HEALTH

D. Marketing Practices

False Statements and Entries

False financial statements are those that are intended to deceive public officials or the general public about the financial condition of an insurer. This often occurs when an important fact about the financial status of an insurer is deliberately withheld in order to present the company in a more favorable light.

Notice of Information Practices

Agents and insurers must provide clear and conspicuous notice of financial information they will collect and disclose in connection with insurance transactions. Notification must be given to

• Applicants before any financial information is disclosed about that applicant to any nonaffiliated third party;
• Policyholders at the later of delivery or issuance of the policy or any other evidence of coverage; and
• All policyholders (other than title insurance policyholders) at least once each calendar year.

Notices must be in writing or in electronic format (with applicant or policyholder agreement) and must state the following:

• The types of financial information that may be collected and disclosed;
• The categories of persons to whom financial information may be disclosed;
• The types of financial information that may be disclosed and the categories of nonaffiliated third parties to whom financial information may be disclosed by contractual agreement;
• An explanation of the right to direct that financial information not be disclosed to nonaffiliated third parties;
• A description of the policies and practices for protecting the confidentiality and security of financial information;
• Any disclosure required under the federal Fair Credit Reporting Act pertaining to the notices regarding the ability to opt out of disclosure of information among affiliates; and
• A description of the types of financial information about former policyholders that may be disclosed and a description of the types of affiliates and nonaffiliated third parties to whom financial information about former policyholders may be disclosed.

Individuals may submit to any insurance institution, agent, or insurance-support organization a written request for access to recorded personal information about the individual that is reasonably described by the individual and reasonably able to be located and retrieved.

After receiving a request, the entity or agent has 30 business days to

• Inform the individual of the nature and substance of the recorded personal information in writing, by telephone, or by other oral communication;
• Permit the individual to see and copy, in person, the recorded personal information or to obtain a copy of the recorded personal information by mail;
• Disclose to the individual the identity, if recorded, of people to whom the personal information has been disclosed within 2 years prior to such request (if the identity is not recorded, the names of people to whom such information is normally disclosed); and
• Provide the individual with the process to request the correction, amendment, or deletion of recorded personal information.

Any personal information provided must identify the source of the information if it is an institutional source.

After receiving a written request from an individual to correct, amend, or delete any recorded personal information about the individual, an insurance institution, agent, or insurance-support organization has 30 business days to

• Correct, amend, or delete the portion of the recorded personal information in dispute; or
• Notify the individual of
  • Its refusal to make the correction, amendment, or deletion;
  • The reasons for the refusal; and
  • The individual's right to file a statement regarding the refusal.

An insurance institution, agent, or insurance-support organization may not disclose any medical-record information or privileged information about an individual collected or received in connection with an insurance transaction unless the disclosure is with the written authorization of the individual, provided

• If submitted by another insurance institution, agent, or insurance-support organization, the authorization meets the following requirements:
  • Is written in plain language;
  • Is dated;
  • Specifies the types of persons authorized to disclose information about the individual;
  • Specifies the nature of the information authorized to be disclosed;
  • Names the insurance institution or agent and identifies by generic reference representatives of the insurance institution to whom the individual is authorizing information to be disclosed;
  • Specifies the purposes for which the information is collected; and
  • Specifies the length of time such authorization shall remain valid; or
• If submitted by a person other than an insurance institution, agent, or insurance-support organization, the authorization is
  • Dated,
  • Signed by the individual, and
  • Obtained 2 years or less prior to the date a disclosure is sought.

HEALTH

Insurance for Senior Citizens and Special Needs Individuals

B. Medicare Supplement Insurance

5. Virginia Regulations and Required Provisions

Continuation and Conversion Requirements

Medicare Supplement policies must provide for benefits and premiums to be suspended at the policy or certificateholder's request for the period he or she has applied for (up to 24 months) in which he or she is entitled to medical assistance under Medicaid. The policyholder must notify the insurer within 90 days after becoming entitled to assistance. If the policyholder loses such entitlement, the policy must be automatically reinstituted. The policyholder must notify the insurer of loss of entitlement within 90 days after the date of loss and pay the premium attributable to the period. Reinstituted coverage may not provide any waiting period for pre-existing conditions, must be substantially equivalent to the coverage in effect before the suspension, and must classify premiums on terms at least as favorable to the policyholder as those that would have applied had the coverage not been suspended.

Supplement Policies for those Eligible by Reason of Disability

Any type of insurer that issues Medicare supplement policies to persons eligible for Medicare based on age must offer at least one policy to Virginia residents who are

• Under 65 years of age;
• Eligible to Medicare by reason of disability; and
• Enrolled in Medicare Part A and B, or will be by the effective date of coverage.

Such policies must be offered upon the request of the individual:

• In the first 6 months after the individual is eligible for Medicare by reason of a disability; or
• During the 63-day period following voluntary or involuntary termination of coverage under a group health plan.

A Medicare supplement policy issued to an individual eligible by reason of disability may not exclude benefits based on a pre-existing condition if the individual has a continuous period of creditable coverage of at least 6 months as of the effective date of coverage.

Insurance Regulation

F. Federal Regulation

3. ACA-Related Federal Market Reforms

Excepted Benefits

The renewability, eligibility, and benefit requirements for the individual health insurance market do not apply to the following limited lines coverages and are considered excepted benefits under all circumstances:

• Accident-only coverage;
• Disability income insurance; and
• Credit-only insurance.

In addition, the following are also excepted benefits if provided under a separate policy, certificate, or contract of insurance and if they meet certain requirements:

• Limited dental or vision benefits;
• Specified disease or illness (for example, cancer policies); and
• Hospital indemnity or other fixed indemnity insurance.

The following are content additions to supplement your existing text unless otherwise indicated:

Property and Casualty Insurance Basics

Binders

Whether issued in writing or orally, binders – temporary agreements to provide coverage until a contract can be issued – cannot be issued for longer than 60 days.

Binders must include all the usual terms of the policy as to which the binder was given, together with any applicable endorsements as are designated in the binder.

Dwelling Policy

Selected Endorsements

Automatic Increase in Insurance  

Automatic increase in insurance is an endorsement that may be added to a dwelling policy to increase the amount of insurance by an annual percentage to offset the effects of inflation. This endorsement requires additional premium.

Broad Theft Coverage

The only theft coverage provided in any dwelling policy forms is theft of property that is a part of the building under the special form.

There are no policy forms that cover theft of personal property. However, broad theft coverage can be added by endorsement if the insured is the owner-occupant of the dwelling.

The endorsement will cover personal property owned by the insured or a resident of the insured's household caused by theft or attempted theft, or for vandalism or malicious mischief that results from theft or attempted theft. There is no coverage if the premises have been vacant for more than 60 consecutive days prior to the loss.

The broad theft endorsement can provide both on-premises and off-premises coverage. Off-premises coverage can be insured only if on-premises coverage is written. A separate limit of liability will be shown on the declarations page for both coverages.

On-premises coverage insures loss of property that is owned or used by the insured or a resident employee at the premises described in the policy. It also extends to property placed for safekeeping in a bank, trust, or safe-deposit company, a public warehouse, or an occupied dwelling not owned, occupied, or rented by the insured.

Off-premises coverage provides protection for property that is either owned or used by the insured, or owned by a resident-employee (while in a dwelling occupied by an insured or while in the employ of the insured), when it is away from the described premises.

There is no off-premises coverage for property at a newly acquired principal residence. However, the on-premises limit will apply automatically for 30 days, including while the property is in transit to the new location.

Certain types of property are covered only for specific amounts. If the insured requires higher limits for these items, additional coverage may be purchased. The categories of property with these special sub-limits are as follows:

For Dwelling ('14) Policy, the following coverage limits apply:

• $200 for money, bank notes, bullion, gold, silver (excluding goldware and silverware), platinum, coins, and other metals;
• $1,500 for securities, accounts, deeds, evidences of debt, letters of credit, notes other than bank notes, manuscripts, passports, tickets, and stamps;
• $1,500 for watercraft and their trailers, furnishings, equipment, and outboard motors;
• $1,500 for other trailers;
• $1,500 for jewelry, watches, furs, and precious and semiprecious stones;
• $2,500 for firearms and related equipment; and
• $2,500 for silver and silver-plated ware, gold and gold-plated ware, and pewterware, including flatware, hollowware, tea sets, trays, and trophies.

  In addition to the special limits, certain types of property are specifically excluded from coverage. The following are the types of property not covered by the broad theft endorsement:

• Animals, birds, or fish;
• Credit cards and fund transfer cards;
• Aircraft, hovercraft, and their parts (except model or hobby aircraft);
• Property while in the mail;
• Property held as a sample or for sale;
• Property specifically described and insured by any other insurance;
• Property of tenants, roomers, and boarders (other than relatives);
• Business property of the insured or resident employee;
• Property in the custody of a laundry, cleaner, tailor, presser, or dryer, except loss by burglary or robbery;
• Property at any other location owned, rented, or occupied by the insured, except if the insured is temporarily residing there;
• Motor vehicles (other than motorized vehicles used to service the premises that are not subject to motor vehicle registration, and vehicles designed to assist the handicapped); and
• Motor vehicle equipment and accessories, including sound receiving, transmitting or recording devices, while in the vehicle.

  Dwelling Under Construction

  Dwellings under construction are eligible for coverage. However, due to the unique nature of these risks, an endorsement is required to modify some of the policy provisions. The limit of liability for a dwelling under construction is provisional, and is based on the completed value of the structure. At the time of loss, the applicable limit is a percentage of the provisional limit, based on the proportion of actual cash value of the property at the time of loss. Premium is based on an average amount of insurance during construction.

  Homeowners Policy

  H. Section I - Conditions (Property) 

  Provisions for Certain Risks

  Homeowners policies that provide for the payment of the full replacement cost of the insured property must permit the insured to file a claim for the actual cash value of the property without impacting their right to file a claim for the difference between the actual cash value and the full replacement cost unless a claim for full replacement cost has been previously resolved.

  Any claim for such difference must be made within 6 months of the last date on which the insured received a payment for actual cash value or the date of entry of a final order of a court of competent jurisdiction declaratory of the right of the insured to full replacement cost, whichever occurs last.

  Selected Endorsements – new section on outline

  Personal Property Replacement Cost

  Personal property replacement cost endorsement changes the actual cash value settlement on personal property, household appliances, carpeting, awnings and outdoor equipment to a replacement cost basis. Certain types of property will not benefit from this coverage, such as fine arts, antiques, memorabilia, articles that are not in good working order, and items that are stored and have become outdated or obsolete.

  There is no requirement that the personal property be insured to 80% of replacement cost at the time of loss. However, some insurers require that the amount of Coverage C be increased to 70% of Coverage A amount when this endorsement is purchased.

  Scheduled Personal Property Endorsement

  If the insured requires higher limits for certain types of property, the scheduled personal property endorsement may be used to schedule individually described items or classes of items on a blanket basis. This endorsement typically provides open peril or special form coverage on listed items. The endorsement provides for the scheduling of 9 different classes of property:

• Jewelry;
• Furs;
• Cameras;
• Musical instruments;
• Silverware;
• Golfer's equipment;
• Fine arts (including porcelains and glassware);
• Postage stamps; and
• Rare and current coins.
• Newly acquired jewelry, furs, cameras, and musical instruments are covered up to the lesser of the following limits:
• 25% of the amount of insurance for that class of property; or
• $10,000.

  The new property must be reported within 30 days of acquisition, and the insured may be required to pay the additional premium from that date. For coverage to apply to fine arts, the report of acquisition must be provided within 90 days.

  Insured perils: this endorsement insures against direct physical loss to property caused by any of the following perils:

• Wear and tear;
• Insects or vermin;
• War;
• Nuclear hazard;
• If fine arts are covered – breakage caused by fire or lightning, windstorm, earthquake or flood, explosions, and malicious damage or theft; or
• If postage stamps are covered – fading, creasing, denting or scratching, transfer of colors, and disappearance.

  The following are additional benefits and features of the scheduled personal property endorsement:

• The Coverage C limits no longer apply for the property scheduled on this endorsement;
• Insured locations: scheduled personal property endorsement covers eligible property worldwide;
• Fine arts and antiques can be covered on an other than ACV basis;
• The special limits of liability no longer apply to items or classes or property scheduled; and
• No deductible will apply to a covered property loss.

Earthquake Endorsement

Earth movement (earthquake) is excluded in all property policies, but usually can be purchased separately for an additional premium. The coverage can be purchased to cover the dwelling, other structures, and/or personal property. Rates generally are determined by the type of construction that determines the dwelling's vulnerability to earthquake losses. Frame buildings are less susceptible to severe damage than masonry veneer buildings. Therefore, they have lower rates for this coverage.

Earthquake coverage provided by endorsement in a homeowners form considers one or more earthquake shocks occurring within a 72-hour period as a single earthquake.

The deductible under earthquake coverage is stated as a percentage of loss; however, it cannot be less than a specified minimum dollar amount (for example, $500 in HO '11 ISO form). The deductible applies separately to buildings, other structures, personal property, and loss of use.

Masonry veneer structures are not covered by an endorsement issued for a frame dwelling. A separate endorsement is available for this type of construction.

Permitted Incidental Occupancies Endorsement

Although certain types of incidental businesses, such as an office or studio, are permitted for eligibility, a separate permitted incidental occupancies endorsement must be attached to cover other structures used for business activity, remove the special limit of liability for business property and the personal liability and medical payments coverage. The limitations are eliminated only for the business described in the endorsement.

Home Daycare Endorsement

If the insured operates a home day care business out of the insured residence, the home day care coverage endorsement may be attached to the policy to cover the liability exposure associated with the business. Coverage excludes loss or damage that results from sexual molestation, corporal punishment, physical or mental abuse, or draft and saddle animals – including vehicles used with such animals, motor vehicles, aircraft, or watercraft. The premium is based on the number of children kept in the home.

Personal Injury Endorsement

Personal injury coverage, including injuries that result from false arrest, libel, slander, defamation of character, and invasion of privacy, may be added by endorsement.

Watercraft Liability Endorsement

Watercraft endorsement provides liability protection for bodily injury or property damage caused by the ownership or use of watercraft (excluding when used to carry persons for a fee or when rented to others).

Business Pursuits Endorsement

Business pursuits is an endorsement that allows an insured to extend the Section II liability coverage to certain business pursuits that occur away from the premises. It covers the activities of the insured, but will not cover the liability of a business owned by an insured.

Commercial Package Policy (CPP)

E. Equipment Breakdown

Business Income - Report of Values

Business Income – Report of Values endorsement is used to report the insured's business income. The information is used for calculating amount to be paid on a lost business claim after a direct loss.

The report contains the total of net sales and other earnings, less expenses, for the 12-month period ending prior to the inception of the beginning policy and an estimate of those values for the 12-month period starting at the inception of the current coverage.

Selected Endorsements – new section on outline

Ordinance or Law Coverage

Ordinance or law is an endorsement that can be added to the property coverage form. It covers a building in the event that the enforcement of any building, zoning, or land use law results in loss or damage, any increased cost of repairs or reconstruction, or demolition and removal costs.

The endorsement is split into 3 different coverages which need to be activated by purchasing each coverage. The insured can purchase all or some of the coverages included. The ordinance or law coverage endorsement can be added only to a property policy written on a replacement cost basis and coinsurance does not apply.

The building listed in the endorsement must suffer covered direct damage to at least part of the structure. Only the part of the structure covered by a peril in the policy and subject to the ordinance or law will benefit from this endorsement.

Coverage is for completion of minimum requirements as stipulated by the ordinance or law. No coverage will be provided for ordinances or laws the insured was required to comply with prior to the loss.

This endorsement can provide the following coverages when selected:

• Coverage A — loss to the undamaged portion of the building-loss in value to the undamaged portion of the building;
• Coverage B — demolition cost of the undamaged portion of the covered building; and
• Coverage C — increased cost of construction for the damaged and undamaged portions of the building.

Peak Season Limit of Insurance

The peak season limit of insurance endorsement adjusts the amount of insurance on business personal property to allow for the changes in value because of seasonal increases in stock. For instance, some retail businesses will have a much larger inventory on hand prior to winter holidays.

Value Reporting Form (Full Value Form) 

The value reporting form is the usual method of determining premiums and amount of coverage on those properties insured for fluctuating values. At the reporting period (either daily, weekly, monthly, quarterly, or policy period, whichever is specified in the contract), the insured reports the values at risk and pays premiums for that period based upon the report.

The value reporting form allows the amount of coverage to float with the changing values. Premiums are adjusted at the end of the policy period based on the average values reported.

The policy limit must be the maximum value expected during the policy period. In the beginning of the policy period, a provisional (or advance premium) is paid, typically based on 75% of the policy limit. During the policy period, the insured is required to file reports as to actual values for specified periods of time. At the end of the policy period, the premium is adjusted as if the average value was held every day of the policy period.

It is important the reports be kept current as required. Should a loss occur on a day when the reports are not current as required, the maximum payable will be whatever the last report said. If the reports are current, the policy will pay what the insured can prove was lost, up to the policy limit. Should a loss occur before the first report is due, up to the full amount of insurance applies. If the first report has not been submitted as required when a loss occurs, the insurer will pay no more than 75% of the amount it would otherwise pay.

If values have been underreported, the insurer will not pay a greater portion of a loss than the amount reported divided by the actual value on the report due date. For example, if the insured reports $50,000 and the actual value is $75,000, only about 67% of the loss value has been reported, so only two-thirds (approximately 67%) of the loss will be covered.

Spoilage

The spoilage endorsement classifies perishable stock as covered property when owned by the insured or when property of others in the care, custody and control of the insured. The endorsement extends coverage for the following causes of loss:

• Breakdown of refrigeration, cooling or humidity control equipment when located at the described premises;
• Contamination by a refrigerant; and
• Power outage, on or off the premises, when beyond the control of the insured.

This endorsement may add an additional condition for maintenance of a refrigeration agreement at the insured location to provide coverage.

The following are content additions to supplement your existing text unless otherwise indicated: