§ 27-1-12-7 — Required provisions relating to defaulting or surrendering policyholder

(a) No policy of life insurance, except as stated
in subsection (f) of this section, bearing a date of issue which is the
same as or later than a transition date to be selected by the company
pursuant to section 12 of this chapter, such transition date in no event
to be later than January 1, 1948, shall be delivered or issued for
delivery in this state, or issued by a company organized under the laws
of this state, unless it shall contain in substance the following
provisions, or corresponding provisions which in the opinion of the
department are at least as favorable to defaulting or surrendering
policyholders as are the minimum requirements specified in this
section and are essentially in compliance with subsection (g) of this
section:
(1) That, in the event of default in any premium payment after
premiums have been paid for at least one (1) full year in the case of
ordinary insurance or three (3) full years in the case of industrial
insurance, the company will grant, upon proper request made not later
than sixty (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 an amount determined as specified in
this section. In lieu of such stipulated paid-up nonforfeiture benefit, the
company may substitute, upon proper request not later than sixty (60)
days after the due date of the premium in default, an 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 sixty (60) days after
the due date of any premium in default, after premiums have been paid
for at least three (3) full years in the case of ordinary insurance or five
(5) full years in the case of industrial insurance, the company will pay,
in lieu of any paid-up nonforfeiture benefit, a cash surrender value of
a stated amount determined as specified in this section;
(3) That, if a request for a nonforfeiture benefit or surrender of the
policy is not made or effected as contemplated in subdivisions (1) and
(2) of this subsection, a designated paid-up nonforfeiture benefit shall
become operative as specified in the policy;
(4) That, if the policy shall have become paid up by completion of
all premium payments or if it continues in the form of a 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 company will pay,
upon surrender of the policy within thirty (30) days after any policy
anniversary, a cash surrender value of such amount as may be
determined 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 twenty (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 to the
credit of the policy and that there is no indebtedness to the company on
account of or secured by the policy;
(6) A brief and general statement of the method to be used in
calculating the cash surrender values and the paid-up nonforfeiture
benefits available under the policy on the policy anniversaries beyond
the last anniversary of those for which such values and benefits are
consecutively shown in the table provided for in subdivision (5) of this
subsection;
(7) An explanation of the manner in which the cash surrender value
and the paid-up nonforfeiture benefit or benefits are affected by the
existence of any paid-up additions to the policy or any indebtedness to
the company on account of or secured by the policy.
Any of the provisions of this subsection not applicable by reason of
the plan of insurance may, to the extent inapplicable, be omitted from
the policy.
The company shall reserve the right to defer the payment of any
cash surrender value for a period of six (6) months after demand
therefor and surrender of the policy.
(b) Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary 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 premiums as defined in subsections (d)
and (dd), corresponding to premiums which would have fallen due on
and after such anniversary, and (2) the amount of any indebtedness to
the company on account of or secured by the policy. However, for any
policy issued on or after the operative date of subsection (dd) of this
section 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 is
an amount not less than the sum of the cash surrender value as defined
in this 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 this paragraph for a policy which
provides only the benefits otherwise provided by such rider or
supplemental policy provision.
For any family policy issued on or after the operative date of
subsection (dd) of this section, 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 seventy-one (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
that 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 that 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
thirty (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 benefit, shall be an amount not less than the
present value, on such anniversary, of the future guaranteed benefits
provided for by such paid-up policy (including any existing paid-up
additions) decreased by any indebtedness to the company on account
of or secured by the policy.
(c) Any paid-up nonforfeiture benefit available under a policy in the
event of default in a premium payment due on any policy anniversary
shall be such that its present value as of such anniversary shall be not
less than the cash surrender value then provided for by such policy or,
if none is provided for, the minimum amount determinable in
accordance with subsection (b) in the absence of the condition of
subsection (a)(2) that premiums be paid for at least a specified period.
(d) This subsection does not apply to policies issued on or after the
operative date of subsection (dd) of this section. Except as provided in
the third paragraph 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 any extra premiums charged because of
impairments or special hazards, that the present value, at the date of
issue of the policy, of all such adjusted premiums shall be equal to the
sum of (i) the then present value of the future guaranteed benefits
provided for by the policy; (ii) two per cent (2%) of the amount of
insurance, if the insurance be uniform in amount, or of the equivalent
uniform amount, as hereinafter defined, if the amount of insurance
varies with duration of the policy; (iii) forty per cent (40%) of the
adjusted premium for the first policy year; (iv) twenty-five per cent
(25%) 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 that for the sole purpose of computing the amounts of
(iii) and (iv) above, no adjusted premiums in excess of four per cent
(4%) of the amount of insurance or uniform amount equivalent thereto
shall be used.
In the case of a policy providing an amount of insurance varying
with duration of the policy, the equivalent uniform amount thereof for
the purpose of this subsection 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 date of issue as the benefits under the policy; provided that in the
case of a policy for a varying amount of insurance issued on the life of
a child under age ten (10), the equivalent uniform amount may be
computed as though the amount of insurance provided by the policy
prior to the attainment of age ten (10) were the amount provided by
such policy at age ten (10) or at expiry, if earlier.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision shall be equal to (a)
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 (b) the adjusted premiums for such term insurance, the
foregoing items (a) and (b) being calculated separately and as specified
in the first two (2) paragraphs of this subsection except that, for the
purposes of (ii), (iii) and (iv) of the first such paragraph, the amount of
insurance or equivalent uniform amount of insurance used in the
calculation of the adjusted premiums referred to in (b) shall be equal
to the excess of the corresponding amount determined for the entire
policy over the amount used in the calculation of the adjusted
premiums in (a).
Except as otherwise provided in the succeeding paragraphs of this
subsection, all 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 1941 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 six (6) years younger than the actual
age of the insured, and such calculations for all policies of industrial
insurance shall be made on the basis of the 1941 Standard Industrial
Mortality Table. All calculations shall be made on the basis of the rate
of interest, not exceeding three and one-half percent (3 1/2%) per
annum, specified in the policy for calculating cash surrender values and
paid-up nonforfeiture benefits; provided that in calculating the present
value of any nonforfeiture benefits consisting of paid-up term insurance
with or without pure endowment of a lesser amount, the rates of
mortality assumed may be not more than one hundred and thirty per
cent (130%) of the rates of the mortality according to such applicable
table; and provided 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 or tables of mortality as may be specified
by the company and approved by the department in rules adopted under
IC 4-22-2.
In the case of ordinary policies bearing a date of issue which is the
same as or later than the operative date of this paragraph as defined in
the succeeding paragraph, all adjusted premiums and present values
referred to in this section shall be calculated on the basis of the
Commissioners 1958 Standard Ordinary Mortality Table and 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 (3 1/2%) per annum, except
that such rate of interest shall not exceed four percent (4%) per annum
for policies bearing a date of issue of or later than September 1, 1973,
and prior to September 1, 1979, and the interest rate may not exceed
five and one-half percent (5 1/2%) per annum for policies bearing a
date of issue after August 31, 1979; 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 six
(6) years younger than the actual age of the insured; provided that in
calculating the present value of any nonforfeiture benefits consisting
of paid-up term insurance with or without pure endowment of a lesser
amount, the rates of mortality assumed may be not more than those
shown in the Commissioners 1958 Extended Term Insurance Table;
and provided 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 or tables of mortality as may be specified by
the company and approved by the department in rules adopted under
IC 4-22-2.
Any company may file with the department a written notice of its
election to invoke the provisions of the preceding paragraph after a
specified date before January 1, 1966. After the filing of such notice,
then upon such specified date (which shall be the operative date of the
preceding paragraph for such company), the preceding paragraph shall
become operative with respect to the ordinary policies issued by such
company and bearing a date of issue which is the same as or later than
such specified date. If a company makes no such election, the operative
date of the preceding paragraph for such company shall be January 1,
1966.
In the case of policies of industrial insurance bearing a date of issue
which is the same as or later than the operative date of this paragraph
as defined in the succeeding paragraph, all adjusted premiums and
present values referred to in this section shall be calculated on the basis
of the Commissioners 1961 Standard Industrial Mortality Table and 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 (3 1/2%) per
annum, except that such rate of interest shall not exceed four percent
(4%) per annum for policies bearing a date of issue of or later than
September 1, 1973, and before September 1, 1979, and the rate of
interest may not exceed five and one-half percent (5 1/2%) per annum
for policies bearing a date of issue after August 31, 1979; provided,
further, that in calculating the present value of any nonforfeiture
benefits consisting of paid-up term insurance with or without pure
endowment of a lesser amount, the rates of mortality assumed may be
not more than those shown in the Commissioners 1961 Industrial
Extended Term Insurance Table; and provided that for insurance issued
on a substandard basis, the calculations of any such adjusted premiums
and present values may be based on such other table or tables of
mortality as may be specified by the company and approved by the
department in rules adopted under IC 4-22-2.
Any company may file with the department a written notice of its
election to invoke the provisions of the preceding paragraph after a
specified date before January 1, 1968. After the filing of such notice,
then upon such specified date (which shall be the operative date of the
preceding paragraph for such company), the preceding paragraph shall
become operative with respect to the policies of industrial insurance
issued by such company and bearing a date of issue which is the same
as or later than such specified date. If a company makes no such
election, the operative date of the preceding paragraph for such
company shall be January 1, 1968.
(dd)(1) This subsection applies to all policies issued on or after the
operative date of this subsection. 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 amounts payable as extra premiums to cover impairments or
special hazards 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 (i) the then present
value of the future guaranteed benefits provided for by the policy; (ii)
one percent (1%) 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 ten (10) policy years; and (iii) one
hundred twenty-five percent (125%) of the nonforfeiture net level
premium as defined in this subsection. Provided that in applying the
percentage specified in (iii) no nonforfeiture net level premium may be
considered to exceed four percent (4%) 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 ten (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 (1) 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
amounts payable as extra premiums to cover impairments and special
hazards, 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, of all such future adjusted premiums
shall be equal to the excess of: (A) 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 (B) 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 (i) one
percent (1%) of the excess, if positive, of the average amount of
insurance at the beginning of each of the first ten (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 ten (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 (ii)
one hundred twenty-five percent (125%) 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 (1) 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 (1) 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 provisions 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, that 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
section shall for all policies of ordinary insurance be calculated on the
basis of (i) the Commissioners 1980 Standard Ordinary Mortality Table
or (ii) at the election of the company for any one (1) or more specified
plans of life insurance, the Commissioners 1980 Standard Ordinary
Mortality Table with Ten-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.
However:
(A) At the option of the company, 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 (a) 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) A company 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 tables referred to in this
subdivision.
(F) For policies issued:
(i) before the operative date of the valuation manual specified
in IC 27-1-12.8-34, any commissioners standard ordinary
mortality tables, adopted after 1980 by the NAIC, that are
approved by the commissioner in rules adopted under IC 4-22-2 for use in determining the minimum nonforfeiture
standard may be substituted for the Commissioners 1980
Standard Ordinary Mortality Table with or without Ten-Year
Select Mortality Factors or for the Commissioners 1980
Extended Term Insurance Table; or
(ii) on or after the operative date of the Valuation Manual
specified in IC 27-1-12.8-34, the Valuation Manual must
provide the commissioners standard ordinary mortality table
for use in determining the minimum nonforfeiture standard
that may be substituted for the Commissioners 1980 Standard
Ordinary Mortality Table with or without Ten-Year Select
Mortality Factors or for the Commissioners 1980 Extended
Term Insurance Table. If the commissioner adopts a rule
under IC 4-22-2 to approve any commissioners standard
ordinary mortality table adopted by the NAIC for use in
determining the minimum nonforfeiture standard for policies
issued on or after the operative date of the Valuation Manual,
that minimum nonforfeiture standard supersedes the
minimum nonforfeiture standard provided by the Valuation
Manual.
(G) For policies issued:
(i) before the operative date of the Valuation Manual
specified in IC 27-1-12.8-34, any commissioners standard
industrial mortality tables, adopted after 1980 by the NAIC,
that are approved by the commissioner in rules adopted under
IC 4-22-2 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; or
(ii) on or after the operative date of the Valuation Manual
specified in IC 27-1-12.8-34, the Valuation Manual must
provide the commissioners standard industrial mortality table
for use in determining the minimum nonforfeiture standard
that may be substituted for the Commissioners 1961 Standard
Industrial Mortality Table or the Commissioners 1961
Industrial Extended Term Insurance Table. If the
commissioner adopts a rule under IC 4-22-2 to approve any
commissioners standard industrial mortality table adopted by
the NAIC for use in determining the minimum nonforfeiture
standard for policies issued on or after the operative date of
the Valuation Manual, that minimum nonforfeiture standard
supersedes the minimum nonforfeiture standard provided by
the Valuation Manual.
(9) The nonforfeiture interest rate per annum for any policy issued
in a particular calendar year shall be as follows:
(A) For policies issued before the operative date of the
Valuation Manual specified in IC 27-1-12.8-34, equal to one
hundred twenty-five percent (125%) of the calendar year
statutory valuation interest rate for such policy under IC 27-1-12.8, rounded to the nearer one quarter of one percent (1/4
of 1%).
(B) For policies issued on or after the operative date of the
Valuation Manual specified in IC 27-1-12.8-34, the
nonforfeiture interest rate per annum for a policy issued in a
particular calendar year must be provided by the Valuation
Manual.
(10) Notwithstanding any other provision in this title 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 September 1, 1981, any company 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
company. If a company makes no such election, the operative date of
this subsection for such company shall be January 1, 1989.
(e) 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 (b), (c), (d), and (dd) may be calculated upon
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 be not less than the amounts used to
provide such additions. Notwithstanding the provisions of subsection
(b), additional benefits payable (1) in the event of death or
dismemberment by accident or accidental means, (2) in the event of
total and permanent disability, (3) as reversionary annuity or deferred
reversionary annuity benefits, (4) as term insurance benefits provided
by a rider or supplemental policy provision to which, if issued as a
separate policy, this section would not apply, (5) as term insurance on
the life of a child or on the lives of children provided in a policy on the
life of a parent of the child, if such term insurance expires before the
child's age is twenty-six (26), is uniform in amount after the child's age
is one (1), and has not become paid up by reason of the death of a
parent of the child, and (6) as other policy benefits additional to life
insurance and endowment benefits, 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.
(f) This section shall not apply to any reinsurance, group insurance,
pure endowment, annuity or reversionary annuity contract, nor to any
term policy of uniform amount, which provides no guaranteed
nonforfeiture or endowment benefits, or renewal thereof, of twenty (20)
years or less expiring before age seventy-one (71), for which uniform
premiums are payable during the entire term of the policy, nor to any
term policy of decreasing amount, which provides no guaranteed
nonforfeiture or endowment benefits, on which each adjusted premium,
calculated as specified in subsections (d) and (dd), is less than the
adjusted premium so calculated on a term policy of uniform amount,
or renewal of it, 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 twenty (20) years or less
expiring before age seventy-one (71), for which uniform premiums are
payable during the entire term of the policy, nor to any 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 (b), (c), (d), and (dd) of this section, exceeds
two and one-half percent (2 1/2%) of the amount of insurance at the
beginning of the same policy year, nor to any policy which shall be
delivered outside this state through an agent or other representative of
the company issuing the policy. 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.
(g) This subsection, in addition to all other applicable subsections
of this section, applies 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
an amount which does not differ by more than two tenths of one
percent (.2%) 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 ten (10) policy years, from the sum of (a)
the greater of zero (0) and the basic cash value specified in this
subsection and (b) the present value of any existing paid-up additions
less the amount of any indebtedness to the company under 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 company, 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. However, the effects on
the basic cash value of supplemental life insurance or annuity benefits
or of family coverage, as described in subsection (b) or (d) of this
section, whichever is applicable, shall be the same as are the effects
specified in that subsection 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 (d) or (dd), 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 (.2%) 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 ten (10) policy years; and
(2) must be such that no percentage after the later of the two (2)
policy anniversaries specified in the preceding item (a) may apply
to fewer than five (5) consecutive policy years. 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 (d) or
(dd) 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 (a), (b), (c), (dd), and (e) of this
section. The amounts of any cash surrender values and of any paid-up
nonforfeiture benefits granted in connection with additional benefits
such as those listed as subdivisions (1) through (6) in subsection (e) of
this section shall conform with the principles of this subsection.
(h) 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 insurance company 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 subsections (a), (b), (c), (d), or (dd) 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 (a),
(b), (c), (d), or (dd) 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; and
(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 section, as determined by regulations promulgated
by the department.
Formerly: Acts 1935, c.162, s.151B; Acts 1943, c.189, s.3; Acts
1949, c.8, s.1; Acts 1959, c.146, s.2; Acts 1963, c.212, s.1; Acts 1973,
P.L.273, SEC.1. As amended by Acts 1979, P.L.250, SEC.1; Acts
1981, P.L.237, SEC.1; P.L.276-2013, SEC.3; P.L.124-2018,
SEC.16.