This chapter applies to contracts of life insurance and annuities other than reinsurance, group life insurance, group annuities, industrial life and burial insurance; except, that Sections 27-15-15, 27-15-24, 27-15-25, 27-15-28 and 27-15-29 shall apply to industrial life insurance also.
In case the policy provides that the proceeds may be payable in installments which are determinable at issue of the policy, there shall be a table showing the amounts of the guaranteed installments.
There shall be a provision that unless the policy has been surrendered for its cash value, or its cash surrender value has been exhausted or the period of any extended insurance provided by the policy has expired, the policy will be reinstated at any time within three years after the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all overdue premiums and payment, or, within the limits permitted by the then cash value of the policy, reinstatement, of any other indebtedness to the insurer upon the policy, with interest as to both premiums and indebtedness at a rate not exceeding the rate of interest on policy loans specified in the policy in accordance with the provisions of Section 27-15-8, as may be amended from time to time.
There shall be a provision relative to the payment of premiums.
There shall be a provision that when a policy shall become a claim by the death of the insured, settlement shall be made upon receipt of due proof of death and, at the insurer's option, surrender of the policy and proof of the interest of the claimant. If an insurer shall specify a particular period prior to the expiration of which settlement shall be made, such period shall not exceed two months from the receipt of such proofs.
There shall be a title on the policy briefly describing the same.
A clause in any policy of life insurance or annuity contract providing that such policy or contract shall be incontestable after a specified period shall preclude only a contest of the validity of the policy or contract and shall not preclude the assertion at any time of defenses based upon provisions in the policy or contract which exclude or restrict coverage, whether or not such restrictions or exclusions are excepted in such clause.
(a) No annuity or pure endowment contract, other than reversionary annuities, survivorship annuities or group annuities and except as stated in this section, shall be delivered or issued for delivery in this state unless it contains in substance each of the provisions specified in Sections 27-15-17 through 27-15-22. Any of such provisions not applicable to single premium annuities or single premium pure endowment contracts shall not, to that extent, be incorporated therein.
(b) This section shall not apply to contracts for deferred annuities included in, or upon the lives of beneficiaries under, life insurance policies.
In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that there shall be a period of grace of one month, but not less than 30 days, within which any stipulated payment to the insurer falling due after the first may be made, subject at the option of the insurer to an interest charge thereon at a rate to be specified in the contract but not exceeding six percent per annum for the number of days of grace elapsing before such payment, during which period of grace the contract shall continue in full force; but in case a claim arises under the contract on account of death prior to expiration of the period of grace before the overdue payment to the insurer or the deferred payments of the current contract year, if any, are made, the amount of such payments, with interest on any overdue payments, may be deducted from any amount payable under the contract in settlement.
If any statements, other than those relating to age, sex and identity, are required as a condition to issuing an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity and subject to Section 27-15-20, there shall be a provision that the contract shall be incontestable after it has been in force during the lifetime of the person, or of each of the persons, as to whom such statements are required for a period of two years from its date of issue, except for nonpayment of stipulated payments to the insurer; and at the option of the insurer, such contract may also except any provisions relative to benefits in the event of disability and any provisions which grant insurance specifically against death by accident or accidental means.
In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that the written contract shall constitute the entire contract between the parties or, if a copy of the application or a summary thereof is endorsed upon or attached to the contract when issued, a provision that the written contract and the application or summary thereof shall constitute the entire contract between the parties. In the event of discrepancies between the original application and the summary, the contents of the original application shall govern. When a summary of the application is attached to the policy, the insurer shall keep and maintain the original application for insurance or a copy thereof for a period of not less than three years from the date on which the policy was issued.
(a) No policy of life insurance other than industrial, group and pure endowments, with or without return of premiums or of premiums and interest, shall be delivered or issued for delivery in this state unless it contains in substance all of the provisions required by Sections 27-15-3 through 27-15-14. This section shall not apply to burial insurance, annuity contracts, to any provision of a life insurance policy, or contract supplemental thereto, relating to disability benefits or to additional benefits in the event of death or dismemberment by accident or accidental means or to any provision relating to waiver of premiums in the event of death or disability of the beneficiary or premium payer.
(b) Any of such provisions, or portions thereof not applicable to single premium or term policies, shall, to that extent, not be incorporated therein.
In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that if the age or sex of the person, or persons, upon whose life, or lives, the contract is made, or of any of them, has been misstated, the amount payable or benefits accruing under the contract shall be such as the stipulated payment, or payments, to the insurer would have purchased according to the correct age or sex and that if the insurer shall make, or has made, any overpayment, or overpayments, on account of any such misstatement the amount thereof, with interest at the rate to be specified in the contract but not exceeding six percent per annum, may be charged against the current or next succeeding payment, or payments, to be made by the insurer under the contract.
If an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, is participating, there shall be a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the contract.
In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that the contract may be reinstated at any time within one year from the default in making stipulated payments to the insurer unless the cash surrender value has been paid, but all overdue stipulated payments and any indebtedness to the insurer on the contract shall be paid or reinstated with interest thereon at a rate to be specified in the contract, but not exceeding six percent per annum payable annually, and, in cases where applicable, the insurer may also include a requirement of evidence of insurability satisfactory to the insurer.
(a) Except as stated in this section, no contract for a reversionary annuity shall be delivered or issued for delivery in this state unless it contains in substance each of the following provisions:
(1) Any such reversionary annuity contract shall contain the provisions specified in Sections 27-15-17 through 27-15-21 except that under Section 27-15-20 the insurer may at its option provide for an equitable reduction of the amount of the annuity payments in settlement of an overdue or deferred payment in lieu of providing for deduction of such payments from an amount payable upon settlement under the contract; and
(2) In such reversionary annuity contracts, there shall be a provision that the contract may be reinstated at any time within three years from the date of default in making stipulated payments to the insurer upon production of evidence of insurability satisfactory to the insurer and upon condition that all overdue payments and any indebtedness to the insurer on account of the contract be paid or, within the limits permitted by the then cash values of the contract, reinstated with interest as to both payments and indebtedness at a rate to be specified in the contract, but not exceeding six percent per annum compounded annually.
(b) This section shall not apply to group annuities or to annuities included in life insurance policies, and any of such provisions not applicable to single premium annuities shall not to that extent be incorporated therein.
(a) No policy of life insurance shall be delivered or issued for delivery in this state if it contains any of the following provisions:
(1) A provision for a period shorter than that provided by statute within which an action may be commenced on such a policy; and
(2) A provision which excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status; except, that a policy may contain provisions excluding or restricting coverage as specified therein in the event of death under any one or more of the following circumstances:
a. Death as a result, directly or indirectly, of war, declared or undeclared, or of action by military forces, or of any act or hazard of such war or action, or of service in the military, naval or air forces or in civilian forces auxiliary thereto, or from any cause while a member of such military, naval or air forces of any country at war, declared or undeclared, or of any country engaged in such military action;
b. Death as a result of aviation or any air travel or flight;
c. Death as a result of a specified hazardous occupation or occupations, avocation or avocations;
d. Death while the insured is a resident outside continental United States and Canada; or
e. Death within two years from the date of issue of the policy as a result of suicide, while sane or insane.
(b) A policy which contains any exclusion or restriction pursuant to subsection (a) of this section shall also provide that in the event of death under the circumstances to which any such exclusion or restriction is applicable the insurer will pay an amount not less than a reserve determined according to the commissioner's reserve valuation method upon the basis of the mortality table and interest rate specified in the policy for the calculation of nonforfeiture benefits, or, if the policy provides for no such benefits, computed according to a mortality table and interest rate determined by the insurer and specified in the policy, with adjustment for indebtedness or dividend credit; except, that if the policy has been in force for not more than two years, the insurer shall pay the amount of the gross premiums charged on the policy less dividends paid in cash or used in the payment of premiums thereon and less any indebtedness to the insurer on the policy, including interest due or accrued.
(c) This section shall not apply to group life insurance, disability insurance, reinsurance or annuities, or to any provision in a life insurance policy or contract supplemental thereto relating to disability benefits or to additional benefits in the event of death or dismemberment by accident or accidental means or to any provision relating to waiver of premium in event of death or disability of the beneficiary or premium payer.
(d) Nothing contained in this section shall prohibit any provision which in the opinion of the commissioner is more favorable to the policyholder than a provision permitted by this section.
A reinstated policy of life insurance or annuity contract may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contestability after original issuance.
Any life insurer shall have the power to hold under agreement the proceeds of any policy issued by it upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as set forth in the policy or as agreed to in writing by the insurer and the policyholder. Upon maturity of a policy, in the event the policyholder has made no such agreement, the insurer shall have the power to hold the proceeds of the policy under an agreement with the beneficiaries. The insurer shall not be required to segregate the funds so held but may hold them as part of its general assets.
In determining the amount due under any life insurance policy heretofore or hereafter issued, deduction may be made of:
(1) Any unpaid premiums or installments thereof for the current policy year due under the terms of the policy; and
(2) The amount of principal and accrued interest of any policy loan or other indebtedness against the policy then remaining unpaid.
(a) This section shall be known as the standard nonforfeiture law for individual deferred annuities.
(b) This section shall not apply to any reinsurance group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced or reversionary annuity, nor to any contract which shall be delivered outside this state through an agent or other representative of the company issuing the contract.
(c) In the case of contracts issued on or after the operative date of this section as defined in subsection (l) no contract of annuity, except as stated in subsection (b), shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the commissioner are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract:
(1) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (e), (f), (g), (h), and (j);
(2) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (e), (f), (h), and (j). The company shall reserve the right to defer the payment of such cash surrender benefit for a period of six months after demand therefor with surrender of the contract;
(3) A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of such benefits; and
(4) A statement that any paid-up annuity, cash surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this section, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than $20.00 monthly, the company may at its option terminate such contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract.
(d) The minimum values as specified in subsections (e), (f), (g), (h), and (j) of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection:
(1) With respect to contracts providing for flexible considerations, the minimum nonforfeiture amount at any time at, or prior to, the commencement of any annuity payments shall be equal to an accumulation up to such time at a rate of interest of one and one-half percent per annum of percentages of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of:
a. any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest of three percent per annum; and
b. the amount of any indebtedness to the company on the contract, including interest due and accrued; and increased by any existing additional amounts credited by the company to the contract.
The net consideration for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero and shall be equal to the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of $30.00 and less a collection charge of $1.25 per consideration credited to the contract during that contract year. The percentages of net considerations shall be 65 percent of the net consideration for the first contract year and 87 1/2 percent of the net considerations for the second and later contract years. Notwithstanding the provisions of the preceding sentence, the percentage shall be 65 percent of the portion of the total net consideration for any renewal contract year which exceeds by not more than two times the sum of those portions of the net considerations in all prior contract years for which the percentage was 65 percent.
(2) With respect to contracts providing for fixed scheduled considerations, minimum nonforfeiture amounts shall be calculated on the assumption that considerations are paid annually in advance and shall be defined as for contracts with flexible considerations which are paid annually with two exceptions:
a. The portion of the net consideration for the first contract year to be accumulated shall be the sum of 65 percent of the net consideration for the first contract year plus 22 1/2 percent of the excess of the net consideration for the first contract year over the lesser of the net considerations for the second and third contract years.
b. The annual contract charge shall be the lesser of (i) $30.00 or (ii) 10 percent of the gross annual consideration.
(3) With respect to contracts providing for a single consideration, minimum nonforfeiture amounts shall be defined as for contracts with flexible considerations except that the percentage of net consideration used to determine the minimum nonforfeiture amount shall be equal to 90 percent and the net considerations shall be the gross consideration less a contract charge of $75.00.
(e) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrender of the contract, such present value being calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
(g) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of the paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
(h) For the purpose of determining the benefits calculated under subsections (f) and (g) in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.
(i) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
(j) Any paid-up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
(k) For any contract which provides, within the same contract by rider or supplemental contract provisions, both annuity benefits and life insurance benefits that are in excess of the greater cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (e), (f), (g), (h), and (j) additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits or (3) as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this section. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.
(l) After June 30, 2004, and until June 30, 2006, any company may elect to either comply with the provisions of this section or to comply with the provisions of Section 27-15-28.2. This section shall cease to be operative with respect to annuity contracts issued by a company after June 30, 2006.
(a) This section shall be known as the standard nonforfeiture law for individual deferred annuities.
(b) This section shall not apply to any reinsurance group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced or reversionary annuity, nor to any contract which shall be delivered outside this state through an agent or other representative of the company issuing the contract.
(c)(1) In the case of contracts issued on or after the operative date of this section as defined in subsection (l) no contract of annuity, except as stated in subsection (b), shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the commissioner are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract:
a. That upon cessation of payment of considerations under a contract, or upon the written request of the contract owner, the company shall grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (e), (f), (g), (h), and (j).
b. If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company shall pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (e), (f), (h), and (j). The company may reserve the right to defer the payment of such cash surrender benefit for a period not to exceed six months after demand therefor with surrender of the contract after making written request and receiving written approval of the commissioner. The request shall address the necessity and equitability to all policyholders of the deferral.
c. A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of such benefits.
d. A statement that any paid-up annuity, cash surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.
(2) Notwithstanding the requirements of this section, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than twenty dollars ($20) monthly, the company may at its option terminate such contract by payment in cash of the then present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract.
(d) The minimum values as specified in subsections (e), (f), (g), (h), and (j) of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection.
(1)a. The minimum nonforfeiture amount at any time at, or prior to, the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest as indicated in subdivision (2) of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of subparagraphs 1, 2, 3, and 4:
1. Any prior withdrawals from or partial surrenders of the contract accumulated at rates of interest as indicated in subdivision (2).
2. An annual contract charge of fifty dollars ($50), accumulated at rates of interest as indicated in subdivision (2).
3. Any premium tax paid by the company for the contract, accumulated at rates of interest as indicated in subdivision (2).
4. The amount of any indebtedness to the company on the contract, including interest due and accrued.
b. The net consideration for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to eighty-seven and one-half percent of the gross considerations credited to the contract during that contract year.
(2) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as the lesser of three percent per annum and the following, which shall be specified in the contract if the interest rate will be reset:
a. The five-year constant maturity treasury rate reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under paragraph d.
b. Reduced by 125 basis points.
c. Where the resulting interest rate is not less than one percent.
d. The interest rate shall apply for an initial period and may be redetermined for additional periods. The redetermination date, basis and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the five-year constant maturity treasury rate to be used at each redetermination date.
(3) During the period or term that a contract provides substantive participation in an equity indexed benefit, it may increase the reduction described in paragraph b. of subdivision (2) by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. Lacking such a demonstration that is acceptable to the commissioner, the commissioner may disallow or limit the additional reduction.
(4) The commissioner may adopt rules to implement subdivision (3) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the commissioner determines adjustments are justified.
(e) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrender of the contract, such present value being calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
(g) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of the paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
(h) For the purpose of determining the benefits calculated under subsections (f) and (g) in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.
(i) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
(j) Any paid-up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
(k) For any contract which provides, within the same contract by rider or supplemental contract provisions, both annuity benefits and life insurance benefits that are in excess of the greater cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (e), (f), (g), (h), and (j) additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits or, (3) as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this section. The inclusion of such additional benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits.
(1) After June 30, 2004, any company may elect to apply the provisions of this section to annuity contracts on a contract form-by-contract form basis before July 1, 2006. In all other instances, this section shall become operative with respect to annuity contracts issued by the company after June 30, 2006.
(m) The commissioner may adopt rules to implement the provisions of this section.
(a) This section shall be known as the standard nonforfeiture law for life insurance.
(b) In the case of policies issued on, or after January 1, 1972, no policy of life insurance, except as set forth in subsection (n) of this section, shall be delivered or issued for delivery in this state unless it shall contain in substance the following provisions, or corresponding provisions which, in the opinion of the commissioner, are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this subsection and are essentially in compliance with subsection (m) of this section:
(1) That, in the event of default in any premium payment, the insurer will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of such due date, of such amount as may be specified in this section. In lieu of such stipulated paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than 60 days after the due date of the premium in default, in actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits;
(2) That, upon surrender of the policy within 60 days after the due date of any premium payment in default after premiums have been paid for at least three full years in the case of ordinary insurance and five full years in the case of industrial insurance, the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as may be specified in this section;
(3) That a specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make such election elects another available option not later than 60 days after the due date of the premium in default;
(4) That, if the policy shall have become paid up by completion of all premium payments, or if it is continued under any paid-up nonforfeiture benefit which became effective on, or after, the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the insurer will pay, upon surrender of the policy within 30 days after any policy anniversary, a cash surrender value of such amount as may be specified in this section;
(5) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums or which provide an option for changes in benefits or premiums other than a change to a new policy, a statement of the mortality table, interest rate and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy. In the case of all other policies, a statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary, either during the first 20 policy years or during the term of the policy, whichever is shorter, such values and benefits to be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the insurer on the policy; and
(6) A statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance laws of this state; an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the insurer on the policy; and a statement of the method to be used in calculating the cash surrender value, and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy.
(c) Any of the provisions, or portions thereof, set forth in subdivisions (1) through (6) of subsection (b) of this section which are not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy. The insurer shall reserve the right to defer the payment of any cash surrender value for a period of six months after demand therefor with surrender of the policy.
(d) Any cash surrender value available under the policy in the event of default in the premium payment due on any policy anniversary, whether or not required by subsection (b) of this section, shall be an amount not less than the excess, if any, of the present value on such anniversary of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions if there had been no default, over the sum of:
(1) The then present value of the adjusted premium as defined in subsections (f), (g), (h), (i), and (j) of this section, corresponding to premiums which would have fallen due on and after such anniversary; and
(2) The amount of any indebtedness to the insurer on account of or secured by the policy.
Provided, however, that for any policy issued on or after the operative date of subsection (j) of this section, as defined therein, which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value referred to in the first paragraph of this subsection shall be an amount not less than the sum of the cash surrender value as defined in such paragraph for an otherwise similar policy issued at the same age without such rider or supplemental policy provision and the cash surrender value as defined in such paragraph for a policy which provides only the benefits otherwise provided by such rider or supplemental policy provision.
Provided, further, that for any family policy issued on or after the operative date of subsection (j) of this section, as defined therein, which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse's age 71, the cash surrender value referred to in the first paragraph of this subsection shall be an amount not less than the sum of the cash surrender value as defined in such paragraph for an otherwise similar policy issued at the same age without such term insurance on the life of the spouse and the cash surrender value as defined in such paragraph for a policy which provides only the benefits otherwise provided by such term insurance on the life of the spouse.
Any cash surrender value available within 30 days after any policy anniversary under any policy paid up by completion of all premium payments or any policy continued under any paid-up nonforfeiture benefits, whether or not required by subsection (b) of this section, shall be an amount not less than the present value, on such anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the insurer on account of or secured by the policy.
(e) Any paid-up nonforfeiture benefit available under the policy in the event of default in the premium payment due on any policy anniversary shall be such that its present value as of such anniversary shall be at least equal to the cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value which would have been required by this section in the absence of the condition that premiums shall have been paid for at least a specified period.
(f) This subsection shall not apply to policies issued on or after the operative date of subsection (j) of this section, as defined therein. Except as provided in subsection (h) of this section, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding extra premiums on a substandard policy, that the present value at the date of issue of the policy, of all such adjusted premiums shall be equal to the sum of:
(1) The then present value of the future guaranteed benefits provided for by the policy;
(2) Two percent of the amount of the insurance if the insurance be uniform in amount, or of the equivalent uniform amount, as defined in this section, if the amount of insurance varies with the duration of the policy;
(3) Forty percent of the adjusted premium for the first policy year; and
(4) Twenty-five percent of either the adjusted premium for the first policy year or the adjusted premium for a whole life policy of the same uniform or equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance, whichever is less; provided, however, that in applying the percentages specified in subdivisions (3) and (4) of this subsection, no adjusted premiums shall be deemed to exceed four percent of the amount of insurance or uniform amount equivalent thereto.
Whenever the plan or term of a policy has been changed, either by request of the insured or automatically in accordance with the provisions of the policy, the date of inception of the changed policy for the purposes of determining a nonforfeiture benefit or cash surrender value shall be the date as of which the age of the insured is determined for the purposes of the changed policy. The date of issue of a policy for the purpose of this subsection and subsections (g) and (h) of this section shall be the date as of which the rated age of the insured is determined.
(g) This subsection shall not apply to policies issued on or after the operative date of subsection (j) of this section, as defined therein. In the case of a policy providing an amount of insurance varying with the duration of the policy, the equivalent uniform amount thereof for the purposes of subsection (f) of this section shall be deemed to be the uniform amount of insurance provided by an otherwise similar policy containing the same endowment benefit, or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the date of issue as the benefits under the policy; provided, however, that, in the case of a policy for a varying amount of insurance issued on the life of a child under age 10, the equivalent uniform amount may be computed as though the amount of insurance provided by the policy prior to the attainment of age 10 were the amount provided by such policy at age 10.
(h) This subsection shall not apply to policies to be issued on or after the operative date of subsection (j) of this section, as defined therein. The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provision shall be equal to: (1) The adjusted premiums for an otherwise similar policy issued at the same age without such term insurance benefits increased, during the period for which premiums for such term insurance benefits are payable, by (2) the adjusted premiums for such term insurance, subdivisions (1) and (2) of this subsection being calculated separately, and as specified in subsections (f) and (g) of this section.
(i) This subsection shall not apply to ordinary or industrial policies to be issued on or after the operative date of subsection (j), as defined therein. The adjusted premiums and present values referred to in this section shall, for all policies of ordinary insurance, be calculated on the basis of the commissioners' 1958 standard ordinary mortality table, provided that, for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than three years younger than the actual age of the insured and provided that, for any category of ordinary insurance issued on female risks on or after July 30, 1979, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured. Such calculation for all policies of industrial insurance shall be made on the basis of the commissioners' 1961 standard industrial mortality table. All calculations shall be made on the basis of the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits; provided, that such rate of interest shall not exceed three and one-half percent per annum; provided further, that a rate of interest not exceeding four percent per annum may be used for policies issued on or after August 23, 1976, and prior to July 30, 1979, and a rate of interest not exceeding five and one-half percent per annum may be used for policies issued on or after July 30, 1979; provided, however, that, in calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed in the case of ordinary policies may not be more than those shown in the commissioners' 1958 extended term insurance table and, in the case of industrial policies, may not be more than those shown in the commissioners' 1961 industrial extended term insurance table; provided further, that, for insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the commissioner.
(j) (1) This subsection shall apply to all policies issued on or after the operative date of this subsection as defined herein. Except as provided in subdivision (7) of this subsection, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding extra premiums on a substandard policy and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums shall be equal to the sum of:
a. The then present value of the future guaranteed benefits provided for by the policy;
b. One percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and
c. One hundred twenty-five percent of the nonforfeiture net level premium, as hereinafter defined; provided, however, that in applying the percentage specified in this paragraph, no nonforfeiture net level premium shall be deemed to exceed four percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years.
The date of issue of a policy for the purpose of this subsection shall be the date as of which the rated age of the insured is determined.
(2) The nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one percent per annum, payable on the date of issue of the policy and on each anniversary of such policy on which a premium falls due.
(3) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums or which provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values shall initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any such change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change.
(4) Except as otherwise provided in subdivision (7) of this subsection, the recalculated future adjusted premiums for any such policy shall be such uniform percentage of the respective future premiums specified in the policy for each policy year, excluding extra premiums on a substandard policy and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value at the time of change to the newly defined benefits or premiums, or all such future adjusted premiums shall be equal to the excess of the sum of (i) the then present value of the then future guaranteed benefits provided for by the policy and (ii) the additional expense allowance, if any, over the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.
(5) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of:
a. One percent of the excess, if positive, of the average amount of insurance at the beginning of each of the first 10 policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first 10 policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and
b. One hundred twenty-five percent of the increase, if positive, in the nonforfeiture net level premium.
(6) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing a. by b. where a. equals the sum of (i) the nonforfeiture net level premium applicable prior to the change times the present value of an annuity of one percent per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred; and (ii) the present value of the increase in future guaranteed benefits provided for by the policy, and b. equals the present value of an annuity of one percent per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due.
(7) Notwithstanding any other provision of this subsection to the contrary, in the case of a policy issued on a substandard basis, which provides reduced graded amounts of insurance, so that, in each policy year, such policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis, which provides higher uniform amounts of insurance, adjusted premiums and present values for such substandard policy may be calculated as if it were issued to provide such higher uniform amounts of insurance on the standard basis.
(8) All adjusted premiums and present values referred to in this subsection shall, for all policies of ordinary insurance, be calculated on the basis of the commissioners' 1980 standard ordinary mortality table or, at the election of the insurer for any one or more specified plans of life insurance, the commissioners' 1980 standard ordinary mortality table with 10-year select mortality factors; shall, for all policies of industrial insurance, be calculated on the basis of the commissioners' 1961 standard industrial mortality table; and shall, for all policies issued in a particular calendar year, be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this subsection, for policies issued in that calendar year; provided, however, that:
a. At the option of the insurer, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this subsection, for policies issued in the immediately preceding calendar year.
b. Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by subsection (b) of this section, shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of such paid-up nonforfeiture benefit and paid-up dividend additions, if any.
c. An insurer may calculate the amount of any guaranteed paid-up nonforfeiture benefit, including any paid-up additions, under the policy on the basis of an interest rate no lower than that specified in the policy for calculating cash surrender values.
d. In calculating the present value of any paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the commissioners' 1980 extended term insurance table for policies of ordinary insurance and not more than the commissioners' 1961 industrial extended term insurance table for policies of industrial insurance.
e. For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables.
f. Any ordinary mortality tables, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the commissioners' 1980 standard ordinary mortality table with or without 10-year select mortality factors or for the commissioners' 1980 extended term insurance table.
g. Any industrial mortality tables, adopted after 1980 by the National Association of Insurance Commissioners, that are approved by regulation promulgated by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for the commissioners' 1961 standard industrial mortality table or the commissioners' 1961 industrial extended term insurance table.
(9) The nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to 125 percent of the calendar year statutory valuation interest rate for such policy as defined in the standard valuation law, rounded to the nearest one-quarter of one percent.
(10) Notwithstanding any other provision of this code to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provisions of that policy form.
(11) After the effective date of this subsection, any insurer may file with the commissioner a written notice of its election to comply with the provisions of this subsection after a specified date before January 1, 1989, which shall be the operative date of this subsection for such insurer. If an insurer makes no such election, the operative date of this subsection for such insurer shall be January 1, 1989.
(k) In the case of any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or, in the case of any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in subsection (b), (c), (d), (e), (f), (g), (h), (i), or (j) of this section, then:
(1) The commissioner must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by subsection (b), (c), (d), (e), (f), (g), (h), (i), or (j) of this section;
(2) The commissioner must be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds;
(3) The cash surrender values and paid-up nonforfeiture benefits provided by such plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this standard nonforfeiture law for life insurance, as determined by regulations promulgated by the commissioner.
(l) Any cash surrender value and any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in subsections (d), (e), (f), (g), (h), (i), and (j) of this section may be calculated on the assumption that any death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, shall not be less than the amounts used to provide such additions. Notwithstanding the provisions of subsection (d) of this section, additional benefits payable:
and premiums for all such additional benefits shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.
(m) This subsection, in addition to all other applicable subsections of this section, shall apply to all policies issued on or after January 1, 1985. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be in an amount which does not differ by more than two-tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of (1) the greater of zero and the basic cash value hereinafter specified and (2) the present value of any existing paid-up additions, less the amount of any indebtedness to the insurer on account of or secured by the policy.
The basic cash value shall be equal to the present value, on such anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the insurer, if there had been no default, less the then present value of the nonforfeiture factors, as defined in this subsection, corresponding to premiums which would have fallen due on and after such anniversary; provided, however, that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in subsection (d) or (h) of this section, whichever is applicable, shall be the same as are the effects specified in subsection (d) or (h) of this section, whichever is applicable, on the cash surrender values defined in that subsection.
The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in subsection (f), (g), (h), or (j) of this section, whichever is applicable. Except as is required by the next succeeding sentence of this paragraph, such percentage: (1) Must be the same percentage for each policy year between the second policy anniversary and the later of (i) the fifth policy anniversary and (ii) the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and (2) Must be such that no percentage after the later of the two policy anniversaries specified in the preceding item (1) may apply to fewer than five consecutive policy years.
Provided, that no basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in subsection (f), (g), (h), or (j) of this section, whichever is applicable, were substituted for the nonforfeiture factors in the calculation of the basic cash value.
All adjusted premiums and present values referred to in this subsection shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with the other subsections of this section. The cash surrender values referred to in this subsection shall include any endowment benefits provided for by the policy.
Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment, shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in subsections (b), (c), (d), (e), (j), and (l). The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in items (1) through (6) in subsection (l) of this section shall conform with the principles of this subsection.
(n) This section shall not apply to any of the following:
(1) Reinsurance;
(2) Group insurance;
(3) Pure endowment;
(4) Annuity or reversionary annuity contract;
(5) Variable life insurance contract;
(6) Term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of 20 years or less, expiring before age 71, for which uniform premiums are payable during the entire term of the policy;
(7) Term policy of decreasing amount, which provides no guaranteed nonforfeiture for endowment benefits, on which each adjusted premium, calculated as specified in subsections (f), (g), (h), (i), and (j) of this section, is less than the adjusted premium so calculated on a term policy of uniform amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of 20 years or less, expiring before age 71, for which uniform premiums are payable during the entire term of the policy; and
(8) Policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in subsections (d), (e), (f), (g), (h), (i), and (j), exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year.
(o) For purposes of determining the applicability of this section, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life.
(p) This section shall not apply to benefits provided in the form of funeral or monument merchandise and services under burial policies except to the extent provided in Section 27-17-13.
(a) No insurer shall hereafter deliver or issue for delivery in this state any policy or contract providing for the establishment of its policyholders or members into divisions and classes and for payment of benefits from special funds created for such purpose to the oldest member of the division and class or to the member of the division and class whose policy has been in force the longest period of time upon the death of a member in such division and class, or under any other similar plan; except, that any insurer heretofore operating on such a plan in this state, whether by conversion from a fraternal benefit society or otherwise, may continue to do so upon the condition that the insurer shall not hereafter establish its policyholders or members into any new divisions, classes or groupings of any kind, other than those heretofore established and containing subsisting policies heretofore issued, and that the insurer, if a stock insurer, shall have and maintain paid-in capital stock of at least $100,000.00 or, if a mutual insurer, a surplus of at least $25,000.00 and increase such surplus to, and thereafter maintain surplus in the amount of, at least $100,000.00 within six years from January 1, 1972.
(b) No insurer shall deliver, or issue for delivery, in this state as a part of, or in combination with, any insurance, endowment or annuity contract any agreement or plan which provides for the accumulation of profits over a period of years and for payment of all, or any part of, such accumulated profits only to policyholders or members of a designated group or class who continue as members or policyholders until the end of a specified period of time or under any other similar plan.
(c) This section shall not be deemed to prohibit the payment or allowance of regular annual dividends or 'savings' under regular participating forms of policies or contracts.
There shall be a provision that a grace period of 30 days or, at the option of the insurer, of one month of not less than 30 days shall be allowed within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force; but if a claim arises under the policy during such period of grace, the amount of any premium due or overdue may be deducted from the policy proceeds.
There shall be a provision that the policy, exclusive, at the option of the insurer, of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means, shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue.
There shall be a provision that the policy, or the policy and the application or a summary of such application, if a copy of the application or a summary thereof is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the parties and that all statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties. In the event of discrepancies between the original application and the summary, the contents of the original application shall govern. When a summary of the application is attached to the policy, the insurer shall keep and maintain the original application for insurance or a copy thereof for a period of not less than three years from the date on which the policy was issued.
There shall be a provision that if the age or sex of the insured or of any other person whose age or sex is considered in determining the premium has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or sex.
There shall be a provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy, provided the policy is in force and all premiums to that date are paid. Except as provided in this section, any dividend becoming payable shall, at the option of the party entitled to elect such option, be either:
(1) Payable in cash; or
(2) Applied to any one of such other dividend options as may be provided by the policy. If any such other dividend options are provided, the policy shall further state which option shall be automatically effective if such party shall not have elected some other option. If the policy specifies a period within which such other dividend option may be elected, such period shall be not less than 30 days following the date on which such dividend is due and payable. The annually apportioned dividend shall be deemed to be payable in cash within the meaning of subdivision (1) of this section, even though the policy provides that payment of such dividend is to be deferred for a specified period, provided such period does not exceed six years from the date of apportionment and that interest will be added to such dividend at a specified rate and provided, further, that upon the maturity, surrender or other expiry of the policy, any such dividend, and interest thereon, shall not be forfeited to the insurer. If a participating policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under such nonforfeiture provision shall be applied in the manner set forth in the policy.
(a) For purposes of this section the 'published monthly average' means:
(1) The Monthly Average of the Composite Yield on Seasoned Corporate Bonds as published by Moody's Investors Service, Inc. or any successor thereto; or
(2) In the event that the Monthly Average of the Composite Yield on Seasoned Corporate Bonds is no longer published, a substantially similar average, established by regulation issued by the commissioner.
(b)(1) Policies issued on or after May 15, 1981, shall provide for policy loan interest rates as follows:
a. A provision permitting a maximum interest rate of not more than eight percent per annum; or
b. A provision permitting an adjustable maximum interest rate established from time to time by the life insurer as permitted by law.
(2) The rate of interest charged on a policy loan made under subdivision (1) of this subsection shall not exceed the higher of the following:
a. The published monthly average for the calendar month ending two months before the date on which the rate is determined; or
b. The rate used to compute the cash surrender values under the policy during the applicable period plus one percent per annum.
(3) If the maximum rate of interest is determined pursuant to subdivision (2) of this subsection, the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy.
(4) The maximum rate for each policy must be determined at regular intervals at least once every 12 months, but not more frequently than once in any three month period. At the intervals specified in the policy:
a. The rate being charged may be increased whenever such increase as determined under subdivision (2) of this subsection would increase that rate by one-half percent or more per annum;
b. The rate being charged must be reduced whenever such reduction as determined under subdivision (2) of this subsection would decrease that rate by one-half percent or more per annum.
(5) The life insurer shall:
a. Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan;
b. Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan. Notice need not be given to the policyholder when a further premium loan is added, except as provided in paragraph c. of this subdivision;
c. Send to policyholders with loans reasonable advance notice of any increase in the rate; and
d. Include in the notices required above the substance of the pertinent provisions of subdivisions (1) and (3) of this subsection.
(6) The loan value of the policy shall be determined in accordance with Section 27-15-8, but no policy shall terminate in a policy year as the sole result of change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year.
(7) The substance of the pertinent provisions of paragraphs (1) and (3) of this subsection shall be set forth in the policies to which they apply.
(8) For purposes of this subsection:
a. The rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy.
b. The term 'policy loan' includes any premium loan made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due.
c. The term 'policyholder' includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer.
d. The term 'policy' includes certificates issued by a fraternal benefit society and annuity contract which provide for policy loans.
(9) No other provisions of law shall apply to policy loan interest rates unless made specifically applicable to such rates.
(c) The provisions of this section shall not apply to any insurance contract issued before May 15, 1981, unless the policyholder agrees in writing to the applicability of such provisions.
(d) In the event of any conflicts between the provisions of this section and Section 27-15-5, the provisions of this section shall control.
(a) In case of policies issued on and after the operative date of Section 21-15-28, there shall be a provision that after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment the insurer will advance, on proper assignment or pledge of the policy and on the sole security thereof, at a specified rate of interest not exceeding eight percent per annum, payable in advance, an amount equal to or, at the option of the party entitled thereto, less than the loan value of the policy. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, provided that the insurer may deduct, either from such loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining such cash surrender value including any interest then accrued but not due, any unpaid balance of the premium for the current policy year and interest on the loan to the end of the current policy year. The policy may also provide that if interest on any indebtedness is not paid when due it shall then be added to the existing indebtedness and shall bear interest at the same rate and that, if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value thereof, then the policy shall terminate and become void, but not until at least 30 days' notice shall have been mailed by the insurer to the last known address of the insured or policyowner and of any assignee of record at the home office of the insurer. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for six months after application therefor. The policy, at the insurer's option, may provide for automatic premium loan, subject to an election of the party entitled to elect.
(b) This section shall not apply to term policies nor to term insurance benefits provided by rider or supplemental policy provision.
In policies issued on and after the operative date of Section 27-15-28, there shall be a table showing in figures the loan value and the cash surrender values and nonforfeiture benefits in accordance with subdivision (b) (5) of Section 27-15-28, either during the first 20 policy years or during the term of the policy, whichever is shorter.
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