§ 4220. Life insurance and annuities; nonforfeiture benefits under\ndefaulted contracts. (a) (1) This section shall apply only to those\npolicies and contracts issued prior to the operative date specified in\nsection four thousand two hundred twenty-one of this article.\n (2) Except as otherwise provided in this chapter, in the event of\ndefault in payment of a premium or a note therefor or any interest on\nsuch note, after three full years' premiums have been paid on a policy\nof life insurance issued by a domestic insurance company on or after\nJanuary first, nineteen hundred forty, such company, upon surrender of\nsuch policy within the period of three months from the due date of the\npayment in default, shall pay to the person entitled thereto a cash\nsurrender value not less than the excess, if any, of subparagraph (A)\nover subparagraph (B) as follows:\n (A) The reserve on the policy at the due date of the premium in\ndefault (including the reserve for any paid-up additions thereto and\nexcluding the reserve for any additional benefits in the event of death\nby accident or for benefits in the event of total and permanent\ndisability or for any continuous instalment payments to the beneficiary\nor to the insured and the beneficiary incidental to the life insurance\nbenefit), determined on the basis, in accordance with section four\nthousand two hundred seventeen of this article, specified in the policy,\nand in addition to such reserve, the amount of any dividends standing to\nthe credit of the policy;\n (B) the sum of any indebtedness to the company on the policy,\nincluding interest due or accrued, and a surrender charge equal to two\nand one-half per centum of the face amount of such policy and of any\npaid-up additions thereto, and if the policy be surrendered within the\nperiod above specified and after the expiration of the grace period, if\nany, following the due date of the payment in default, then there may be\nadded to the sum to be deducted the value of any extended term insurance\ngranted (determined as hereinafter specified) during the period between\nthe expiration of the grace period and the date of surrender of the\npolicy.\n (3) The person entitled to such cash surrender value may, upon demand\ntherefor within three months after the due date of the payment in\ndefault, elect to receive in lieu of such cash surrender value either\nextended term insurance (including pure endowment benefits, if any) or\nreduced paid-up insurance under the policy, for a term, in the case of\nextended term insurance, and for an amount, in the case of reduced\npaid-up insurance, which, in either case, shall be not less than that\nprovided by applying such cash surrender value at the date of default to\nprovide such extended term or paid-up insurance, computed at net rates\nat the attained insurance age of the insured and on the same basis used\nfor the computation of such cash surrender value, except that in the\ncase of policies issued on a substandard basis or policies for which the\nreserves are computed upon the American Men Ultimate Table of Mortality,\nthe term of such extended insurance may be computed upon rates of\nmortality not greater than one hundred thirty per centum of those shown\nby the table specified in the policy for the computation of the reserve.\nThe period of extended term insurance shall date from the due date of\nthe premium in default. Reduced paid-up insurance shall be participating\nif the policy be participating.\n (4) The amount of the extended term insurance shall be not less than\nthe amount of life insurance under the policy as expressed in the policy\nwith the approval of the superintendent (including any paid-up additions\nthereto and excluding any additional benefits on account of death by\naccident or any continuous instalment payments to the beneficiary or to\nthe insured and the beneficiary incidental to the life insurance\nbenefit), decreased by the amount of any indebtedness to the
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