10159.1. This article is applicable only to policies and contracts
issued on or after the operative date as to such policies or
contracts of this article.
10159.2. After December 31, 1943, any insurer may file with the
commissioner a written notice of its election to comply with the
provisions of this article as to any or all of its policies after a
specified date before January 1, 1948. After the filing of such
notice, then upon such specified date, this article shall become
operative with respect to the policies specified in the notice and
which are thereafter issued by such insurer. As to all of its
policies with respect to which an insurer makes no such election, the
operative date of this article shall be January 1, 1948.
10160. Except as provided in Section 10165, no policy of life
insurance shall be delivered or issued for delivery in this state
unless it shall contain in substance the following provisions, or
corresponding provisions which are at least as favorable to the
defaulting or surrendering policyholder as are the minimum
requirements hereinafter specified and are essentially in compliance
with Section 10164.1 of this law:
(a) That, in the event of default in any premium payment after
premiums have been paid for at least one full year 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 hereinafter specified. In lieu of this stipulated
paid-up nonforfeiture benefit, the company may substitute, upon
proper request not later than 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.
(b) 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
or 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 hereinafter specified.
(c) 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.
(d) 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
hereinafter specified.
(e) 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 schedule 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 account of or secured by the
policy. At the option of the insurer such schedule may also show such
values and benefits for any year or years beyond the twentieth
policy year.
(f) A brief and general statement of the method to be used in
calculating the cash surrender value and the 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 with 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 account
of or secured by the policy.
Any of the foregoing provisions or portions thereof 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.
10161. Any cash surrender value available under the policy in the
event of default in a premium payment due on any policy anniversary,
whether or not required by Section 10160, 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 (a) the then present value of the
adjusted premiums as defined in Sections 10163, 10163.1, and 10163.2
corresponding to premiums which would have fallen due on and after
such anniversary, and (b) the amount of any indebtedness to the
company on the policy.
Provided, however, that for any policy issued on or after January
1, 1989, 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
section 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
January 1, 1989, 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 of 71, the cash surrender value referred to
in the first paragraph of this section 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
benefit, whether or not required by Section 10160, 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
company on the policy.
10162. Any paid-up nonforfeiture benefit available under the 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 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 article in the
absence of the condition that premiums shall have been paid for at
least a specified period.
10163. This section shall not apply to policies issued on or after
the operative date of Section 10163.2 as defined therein. Except as
provided in the third paragraph 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 (i) the then present value of the future guaranteed benefits
provided for by the policy; (ii) two percent (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 percent
(40%) of the adjusted premium for the first policy year; (iv)
twenty-five percent (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. In applying the percentages specified
in (iii) and (iv) above, no adjusted premium shall be deemed to
exceed four percent (4%) of the amount of insurance or uniform amount
equivalent thereto.
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 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 providing 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.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision unless such term
insurance benefits are disregarded under Section 10164 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 paragraphs of this section.
Except as otherwise provided in Section 10163.1, all adjusted
premiums and present values referred to in this article shall for all
policies of ordinary insurance be calculated on the basis of the
Commissioners 1941 Standard Ordinary Mortality Table; provided,
however, that for any category of ordinary insurance issued on female
risks, adjusted premiums and present values may be calculated, at
the option of the insurer, according to an age not more than three
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. However, 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 one hundred thirty percent (130%) of the rates
of mortality according to such applicable table; and 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.
10163.1. (a) In the case of ordinary policies issued on or after
the operative date of this subdivision as defined herein, all
adjusted premiums and present values referred to in this article
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 3 1/2 percent per annum except that a rate of interest not
exceeding 4 percent per annum may be used for all policies issued on
or after January 1, 1970, and prior to January 1, 1980, and a rate of
interest not exceeding 5 1/2 percent per annum may be used for all
such policies issued on or after January 1, 1980, except that for any
single premium whole life or endowment insurance policy a rate of
interest not exceeding 6 1/2 percent per annum may be used; 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 years younger than the actual age of the
insured; 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
may be not more than those shown in the Commissioners 1958 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 company and approved by the commissioner.
On or after January 1, 1961, any company may file with the
commissioner a written notice of its election to comply with the
provisions of this subdivision 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 this subdivision for such
company), this subdivision shall become operative with respect to the
ordinary policies thereafter issued by such company. If a company
makes no such election, the operative date of this subdivision for
such company shall be January 1, 1966.
(b) In the case of industrial policies issued on or after the
operative date of this subdivision as defined herein, all adjusted
premiums and present values referred to in this article 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 3 1/2
percent per annum except that a rate of interest not exceeding 4
percent per annum may be used for all such policies issued on or
after January 1, 1970, and prior to January 1, 1980, and a rate of
interest not exceeding 5 1/2 percent per annum may be used for all
such policies issued on or after January 1, 1980, except that for any
single premium whole life or endowment insurance policy a rate of
interest not exceeding 6 1/2 percent per annum may be used. 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 may be not 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 company and approved by the commissioner.
After September 20, 1963, any company may file with the
commissioner a written notice of its election to comply with the
provisions of this subdivision 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 this subdivision for such
company), this subdivision shall become operative with respect to the
industrial policies thereafter issued by such company. If a company
makes no such election, the operative date of this subdivision for
such company shall be January 1, 1968.
This section shall not apply to ordinary or industrial policies
issued on or after the operative date of Section 10163.2.
10163.2. (a) This section shall apply to all policies issued on or
after the operative date of this section as defined herein. Except as
provided in subdivision (g), 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 (1) the then present value of the future
guaranteed benefits provided for by the policy; (2) 1 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 (3) 125 percent of the
nonforfeiture net level premium as hereinafter defined. Provided,
however, that in applying the percentage specified in (3) no
nonforfeiture net level premium shall be deemed to exceed 4 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 section shall be the date as of which the rated age
of the insured is determined.
(b) 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 1 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.
(c) 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.
(d) Except as otherwise provided in subdivision (g), 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 (1) the sum of (A) the then present value of
the then future guaranteed benefits provided for by the policy and
(B) the additional expense allowance, if any, over (2) the then cash
surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of (1) 1
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 (2) 125 percent of the increase, if positive, in the
nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be
equal to the result obtained by dividing (1) by (2) where:
(1) It equals the sum of:
(A) The nonforfeiture net level premium applicable prior to the
change times the present value of an annuity of 1 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
(B) The present value of the increase in future guaranteed
benefits provided for by the policy, and
(2) It equals the present value of an annuity of 1 percent per
annum payable on each anniversary of the policy on or subsequent to
the date of change on which a premium falls due.
(g) Notwithstanding any other provisions of this section 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.
(h) All adjusted premiums and present values referred to in this
article shall for all policies of ordinary insurance be calculated on
the basis of (1) the Commissioners 1980 Standard Ordinary Mortality
Table or (2) at the election of the company for any one 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 section for policies
issued in that calendar year. Provided, however, that:
(1) 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 section, for policies issued in the immediately
preceding calendar year.
(2) Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or
not required by Section 10160, 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.
(3) 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.
(4) 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.
(5) 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.
(6) Any ordinary mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that are approved by regulation promulgated or bulletin issued 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 Ten-Year Select Mortality
Factors or for the Commissioners 1980 Extended Term Insurance Table.
(7) Any industrial mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that are approved by regulation promulgated or bulletin issued 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.
(i) 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 nearer
one-quarter of 1 percent.
(j) Notwithstanding any other provision in 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.
(k) After the effective date of this section, any company may file
with the commissioner a written notice of its election to comply
with the provision of this section after a specified date before
January 1, 1989, which shall be the operative date of this section
for such company. If a company makes no such election, the operative
date of this section for such company shall be January 1, 1989.
10163.3. In the case of any plan of life insurance that 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 that is of
such a nature that minimum values cannot be determined by the methods
described in Section 10160, 10161, 10162, 10163, 10163.1, or
10163.2, then:
(a) 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 Section 10160,
10161, 10162, 10163, 10163.1, or 10163.2.
(b) 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.
(c) The cash surrender values and paid-up nonforfeiture benefits
provided by the 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.
10163.35. (a) Notwithstanding any other provision of law, the form
of any policy, contract, or certificate providing life insurance that
is subject to this article shall be filed by the obligor under the
policy, contract, or certificate with the commissioner before it is
marketed, issued, delivered, or used in this state.
(b) Nothing contained in this section shall be construed as
requiring or providing for the prior approval by the commissioner of
forms of individual life insurance policies, contracts, or
certificates prior to the time the forms are marketed, issued,
delivered, or used in this state.
10164. 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 Sections 10161, 10162, 10163,
10163.1, and 10163.2 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 Section 10161,
additional benefits payable (a) in the event of death or
dismemberment by accident or accidental means, (b) in the event of
total and permanent disability, (c) as reversionary annuity or
deferred reversionary annuity benefits, (d) as term insurance
benefits provided by a rider or supplemental policy provision to
which, if issued as a separate policy, this article would not apply,
(e) 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 26, is
uniform in amount after the child's age is one, and has not become
paid up by reason of the death of a parent of the child, and (f) 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 article, and no such additional benefits
shall be required to be included in any paid-up nonforfeiture
benefits.
10164.1. This section shall apply to all policies issued on or
after January 1, 1986. 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 1 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
(a) the greater of zero and the basic cash value hereinafter
specified 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 hereinafter defined, 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 Section 10161 or 10163 whichever is applicable, shall be
the same as are the effects specified in Section 10161 or 10163
whichever is applicable, on the cash surrender values defined in that
section.
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 Section 10163 or 10163.2 whichever is applicable. Except
as is required by the next succeeding sentence of this paragraph,
such percentage:
(a) Shall 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 1 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.
(b) Must be such that no percentage after the later of the two
policy anniversaries specified in subdivision (a) 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 Section 10163 or 10163.2 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
section 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 sections of this article. The cash
surrender values 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 Sections 10160, 10161,
10162, 10163.2, and 10164. 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 items (a) through (f) in
Section 10164 shall conform with the principles of this section.
10164.2. (a) For a policy of individual life insurance that is
surrendered by the policy owner, the insurer shall return to the
owner all moneys due in relation to that policy as expeditiously as
possible, but in no event more than 45 days from the date the
surrender is effective as provided in subdivision (b). However, this
section does not supersede the provisions of subdivision (f) of
Section 10160 empowering an insurer to defer payment of cash
surrender value for up to six months, to the extent that deferral is
necessary to assure the solvency of the insurer.
(b) Unless a later date permitted by the policy (but not later
than 45 days after the request is received) is requested by the
policy owner, a surrender of a life insurance policy is effective on
the date the request is received, if the request is made to the
insurer or servicing agent authorized by the insurer in writing to
receive these requests on the insurer's behalf and contains the
elements specified by the insurer in the contract. The insurer may
require the request be in writing. The insurer may require some or
all of the following elements, but shall not require more:
(1) A statement that makes it clear that the policy owner intends
to surrender, in whole or in part, the contract in question.
(2) The policy number of the policy to be surrendered.
(3) The name of the insured on the policy to be surrendered.
(4) The signature of the owner of the policy and, if required by
the policy or by a legally binding document of which the insurer has
actual notice, the signature of a collateral assignee, irrevocable
beneficiary, or other person having an interest in the policy through
the legally binding document.
(5) Either the policy itself, or, in lieu of the policy, a
statement that the policy has been lost or destroyed.
(c) When the policy owner requests of an insurer or servicing
agent information about surrendering a policy, the insurer or
servicing agent shall provide, as expeditiously as possible, a
written notice setting forth either the requirements of this section
or the insurer's requirements, if less.
(d) A policy subject to this section issued on or after January 1,
1997, shall either include language, which may be included by
endorsement, or be accompanied by a notice setting forth the elements
necessary to surrender the policy as required by this section or by
the insurer, if less.
(e) Nothing in this section shall be construed to limit an
existing statutory right to return a policy for surrender, nor shall
it limit a contractual provision that provides a greater right or
option to the policy owner.
(f) For a written request, for purposes of this section, "received"
means the first day that the written notice is delivered to the
address of the insurer or servicing agent authorized by the insurer
in writing to receive these requests on the insurer's behalf. An
insurer or servicing agent shall maintain a procedure for ensuring
that requests for surrender are logged or stamped on the date
received, and not on a later date due to the insurer's or servicing
agent's internal routing or delivery procedures. If this procedure is
not maintained, it shall be conclusively presumed that a request was
received on the delivery date shown on an express, certified, or
registered mail receipt form of the United States Postal Service or
by a commercial carrier, if delivered by commercial carrier, or the
earlier of (1) two business days after the request was postmarked by
the United States Postal Service or (2) one business day before the
date stamped received by the insurer or servicing agent. For purposes
of this subdivision, "business day" has the meaning set forth in
subdivision (g) of Section 1215. Postmarks generated by postage
meters not located at an office of the United States Postal Service
are to be disregarded.
(g) This section does not alter a contractual provision governing
calculation of cash or surrender or other values. The effective date
established by subdivision (b) is intended to establish a date
certain on which a policyholder may rely in determining when the
45-day period specified in subdivision (a) begins to run. Subdivision
(b) is not intended to advance a date otherwise provided by contract
that is triggered by a request to surrender. An insurer may request
information in addition to that listed in subdivision (b). However,
an insurer's request for additional information does not delay an
effective date established by a policyholder's compliance with
subdivision (b).
10165. This article shall not apply to any of the following:
(a) Reinsurance.
(b) Group insurance.
(c) Pure endowment.
(d) Annuity or reversionary annuity contract.
(e) 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.
(f) Term policy of decreasing amount, which provides no guaranteed
nonforfeiture or endowment benefits, on which each adjusted premium,
calculated as specified in Sections 10163, 10163.1, and 10163.2, 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.
(g) A 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 specifed in Sections 10161, 10162,
10163, 10163.1, and 10163.2, exceeds 2 1/2 percent of the amount of
insurance at the beginning of the same policy year, nor
(h) A 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 article, the
age at expiry for a joint-term life insurance policy shall be the
age at expiry of the oldest life.
10166. No agreement between the insurer and the policyholder or
applicant for insurance contrary to this article shall be held to
waive any of the provisions of this article.
10167. Any policy to which this article is applicable which does
not contain a paid-up nonforfeiture benefit shall be construed as
granting nonparticipating paid-up term insurance as a nonforfeiture
benefit under subdivision (a) Section 10160.
10167.5. (a) Whenever a nonforfeiture benefit is implemented by a
life insurer in connection with a defaulting policyowner, the insurer
shall provide a notice to the policyowner which explains that action
and refers the policyowner to the other available options, if any,
under the provisions of the policy.
(b) For purposes of this section, any notice to a policyholder
shall be in writing and shall be mailed to the last known address of
the policyowner shown on the records of the insurer.
(c) This section does not apply to any of the following:
(1) Reinsurance.
(2) Group insurance.
(3) Pure endowment.
(4) Annuity or reversionary annuity contract.
(5) Industrial insurance.
10159.1. This article is applicable only to policies and contracts
issued on or after the operative date as to such policies or
contracts of this article.
10159.2. After December 31, 1943, any insurer may file with the
commissioner a written notice of its election to comply with the
provisions of this article as to any or all of its policies after a
specified date before January 1, 1948. After the filing of such
notice, then upon such specified date, this article shall become
operative with respect to the policies specified in the notice and
which are thereafter issued by such insurer. As to all of its
policies with respect to which an insurer makes no such election, the
operative date of this article shall be January 1, 1948.
10160. Except as provided in Section 10165, no policy of life
insurance shall be delivered or issued for delivery in this state
unless it shall contain in substance the following provisions, or
corresponding provisions which are at least as favorable to the
defaulting or surrendering policyholder as are the minimum
requirements hereinafter specified and are essentially in compliance
with Section 10164.1 of this law:
(a) That, in the event of default in any premium payment after
premiums have been paid for at least one full year 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 hereinafter specified. In lieu of this stipulated
paid-up nonforfeiture benefit, the company may substitute, upon
proper request not later than 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.
(b) 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
or 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 hereinafter specified.
(c) 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.
(d) 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
hereinafter specified.
(e) 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 schedule 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 account of or secured by the
policy. At the option of the insurer such schedule may also show such
values and benefits for any year or years beyond the twentieth
policy year.
(f) A brief and general statement of the method to be used in
calculating the cash surrender value and the 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 with 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 account
of or secured by the policy.
Any of the foregoing provisions or portions thereof 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.
10161. Any cash surrender value available under the policy in the
event of default in a premium payment due on any policy anniversary,
whether or not required by Section 10160, 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 (a) the then present value of the
adjusted premiums as defined in Sections 10163, 10163.1, and 10163.2
corresponding to premiums which would have fallen due on and after
such anniversary, and (b) the amount of any indebtedness to the
company on the policy.
Provided, however, that for any policy issued on or after January
1, 1989, 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
section 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
January 1, 1989, 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 of 71, the cash surrender value referred to
in the first paragraph of this section 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
benefit, whether or not required by Section 10160, 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
company on the policy.
10162. Any paid-up nonforfeiture benefit available under the 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 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 article in the
absence of the condition that premiums shall have been paid for at
least a specified period.
10163. This section shall not apply to policies issued on or after
the operative date of Section 10163.2 as defined therein. Except as
provided in the third paragraph 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 (i) the then present value of the future guaranteed benefits
provided for by the policy; (ii) two percent (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 percent
(40%) of the adjusted premium for the first policy year; (iv)
twenty-five percent (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. In applying the percentages specified
in (iii) and (iv) above, no adjusted premium shall be deemed to
exceed four percent (4%) of the amount of insurance or uniform amount
equivalent thereto.
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 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 providing 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.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision unless such term
insurance benefits are disregarded under Section 10164 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 paragraphs of this section.
Except as otherwise provided in Section 10163.1, all adjusted
premiums and present values referred to in this article shall for all
policies of ordinary insurance be calculated on the basis of the
Commissioners 1941 Standard Ordinary Mortality Table; provided,
however, that for any category of ordinary insurance issued on female
risks, adjusted premiums and present values may be calculated, at
the option of the insurer, according to an age not more than three
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. However, 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 one hundred thirty percent (130%) of the rates
of mortality according to such applicable table; and 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.
10163.1. (a) In the case of ordinary policies issued on or after
the operative date of this subdivision as defined herein, all
adjusted premiums and present values referred to in this article
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 3 1/2 percent per annum except that a rate of interest not
exceeding 4 percent per annum may be used for all policies issued on
or after January 1, 1970, and prior to January 1, 1980, and a rate of
interest not exceeding 5 1/2 percent per annum may be used for all
such policies issued on or after January 1, 1980, except that for any
single premium whole life or endowment insurance policy a rate of
interest not exceeding 6 1/2 percent per annum may be used; 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 years younger than the actual age of the
insured; 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
may be not more than those shown in the Commissioners 1958 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 company and approved by the commissioner.
On or after January 1, 1961, any company may file with the
commissioner a written notice of its election to comply with the
provisions of this subdivision 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 this subdivision for such
company), this subdivision shall become operative with respect to the
ordinary policies thereafter issued by such company. If a company
makes no such election, the operative date of this subdivision for
such company shall be January 1, 1966.
(b) In the case of industrial policies issued on or after the
operative date of this subdivision as defined herein, all adjusted
premiums and present values referred to in this article 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 3 1/2
percent per annum except that a rate of interest not exceeding 4
percent per annum may be used for all such policies issued on or
after January 1, 1970, and prior to January 1, 1980, and a rate of
interest not exceeding 5 1/2 percent per annum may be used for all
such policies issued on or after January 1, 1980, except that for any
single premium whole life or endowment insurance policy a rate of
interest not exceeding 6 1/2 percent per annum may be used. 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 may be not 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 company and approved by the commissioner.
After September 20, 1963, any company may file with the
commissioner a written notice of its election to comply with the
provisions of this subdivision 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 this subdivision for such
company), this subdivision shall become operative with respect to the
industrial policies thereafter issued by such company. If a company
makes no such election, the operative date of this subdivision for
such company shall be January 1, 1968.
This section shall not apply to ordinary or industrial policies
issued on or after the operative date of Section 10163.2.
10163.2. (a) This section shall apply to all policies issued on or
after the operative date of this section as defined herein. Except as
provided in subdivision (g), 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 (1) the then present value of the future
guaranteed benefits provided for by the policy; (2) 1 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 (3) 125 percent of the
nonforfeiture net level premium as hereinafter defined. Provided,
however, that in applying the percentage specified in (3) no
nonforfeiture net level premium shall be deemed to exceed 4 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 section shall be the date as of which the rated age
of the insured is determined.
(b) 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 1 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.
(c) 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.
(d) Except as otherwise provided in subdivision (g), 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 (1) the sum of (A) the then present value of
the then future guaranteed benefits provided for by the policy and
(B) the additional expense allowance, if any, over (2) the then cash
surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of (1) 1
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 (2) 125 percent of the increase, if positive, in the
nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be
equal to the result obtained by dividing (1) by (2) where:
(1) It equals the sum of:
(A) The nonforfeiture net level premium applicable prior to the
change times the present value of an annuity of 1 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
(B) The present value of the increase in future guaranteed
benefits provided for by the policy, and
(2) It equals the present value of an annuity of 1 percent per
annum payable on each anniversary of the policy on or subsequent to
the date of change on which a premium falls due.
(g) Notwithstanding any other provisions of this section 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.
(h) All adjusted premiums and present values referred to in this
article shall for all policies of ordinary insurance be calculated on
the basis of (1) the Commissioners 1980 Standard Ordinary Mortality
Table or (2) at the election of the company for any one 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 section for policies
issued in that calendar year. Provided, however, that:
(1) 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 section, for policies issued in the immediately
preceding calendar year.
(2) Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or
not required by Section 10160, 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.
(3) 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.
(4) 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.
(5) 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.
(6) Any ordinary mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that are approved by regulation promulgated or bulletin issued 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 Ten-Year Select Mortality
Factors or for the Commissioners 1980 Extended Term Insurance Table.
(7) Any industrial mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that are approved by regulation promulgated or bulletin issued 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.
(i) 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 nearer
one-quarter of 1 percent.
(j) Notwithstanding any other provision in 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.
(k) After the effective date of this section, any company may file
with the commissioner a written notice of its election to comply
with the provision of this section after a specified date before
January 1, 1989, which shall be the operative date of this section
for such company. If a company makes no such election, the operative
date of this section for such company shall be January 1, 1989.
10163.3. In the case of any plan of life insurance that 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 that is of
such a nature that minimum values cannot be determined by the methods
described in Section 10160, 10161, 10162, 10163, 10163.1, or
10163.2, then:
(a) 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 Section 10160,
10161, 10162, 10163, 10163.1, or 10163.2.
(b) 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.
(c) The cash surrender values and paid-up nonforfeiture benefits
provided by the 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.
10163.35. (a) Notwithstanding any other provision of law, the form
of any policy, contract, or certificate providing life insurance that
is subject to this article shall be filed by the obligor under the
policy, contract, or certificate with the commissioner before it is
marketed, issued, delivered, or used in this state.
(b) Nothing contained in this section shall be construed as
requiring or providing for the prior approval by the commissioner of
forms of individual life insurance policies, contracts, or
certificates prior to the time the forms are marketed, issued,
delivered, or used in this state.
10164. 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 Sections 10161, 10162, 10163,
10163.1, and 10163.2 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 Section 10161,
additional benefits payable (a) in the event of death or
dismemberment by accident or accidental means, (b) in the event of
total and permanent disability, (c) as reversionary annuity or
deferred reversionary annuity benefits, (d) as term insurance
benefits provided by a rider or supplemental policy provision to
which, if issued as a separate policy, this article would not apply,
(e) 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 26, is
uniform in amount after the child's age is one, and has not become
paid up by reason of the death of a parent of the child, and (f) 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 article, and no such additional benefits
shall be required to be included in any paid-up nonforfeiture
benefits.
10164.1. This section shall apply to all policies issued on or
after January 1, 1986. 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 1 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
(a) the greater of zero and the basic cash value hereinafter
specified 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 hereinafter defined, 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 Section 10161 or 10163 whichever is applicable, shall be
the same as are the effects specified in Section 10161 or 10163
whichever is applicable, on the cash surrender values defined in that
section.
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 Section 10163 or 10163.2 whichever is applicable. Except
as is required by the next succeeding sentence of this paragraph,
such percentage:
(a) Shall 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 1 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.
(b) Must be such that no percentage after the later of the two
policy anniversaries specified in subdivision (a) 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 Section 10163 or 10163.2 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
section 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 sections of this article. The cash
surrender values 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 Sections 10160, 10161,
10162, 10163.2, and 10164. 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 items (a) through (f) in
Section 10164 shall conform with the principles of this section.
10164.2. (a) For a policy of individual life insurance that is
surrendered by the policy owner, the insurer shall return to the
owner all moneys due in relation to that policy as expeditiously as
possible, but in no event more than 45 days from the date the
surrender is effective as provided in subdivision (b). However, this
section does not supersede the provisions of subdivision (f) of
Section 10160 empowering an insurer to defer payment of cash
surrender value for up to six months, to the extent that deferral is
necessary to assure the solvency of the insurer.
(b) Unless a later date permitted by the policy (but not later
than 45 days after the request is received) is requested by the
policy owner, a surrender of a life insurance policy is effective on
the date the request is received, if the request is made to the
insurer or servicing agent authorized by the insurer in writing to
receive these requests on the insurer's behalf and contains the
elements specified by the insurer in the contract. The insurer may
require the request be in writing. The insurer may require some or
all of the following elements, but shall not require more:
(1) A statement that makes it clear that the policy owner intends
to surrender, in whole or in part, the contract in question.
(2) The policy number of the policy to be surrendered.
(3) The name of the insured on the policy to be surrendered.
(4) The signature of the owner of the policy and, if required by
the policy or by a legally binding document of which the insurer has
actual notice, the signature of a collateral assignee, irrevocable
beneficiary, or other person having an interest in the policy through
the legally binding document.
(5) Either the policy itself, or, in lieu of the policy, a
statement that the policy has been lost or destroyed.
(c) When the policy owner requests of an insurer or servicing
agent information about surrendering a policy, the insurer or
servicing agent shall provide, as expeditiously as possible, a
written notice setting forth either the requirements of this section
or the insurer's requirements, if less.
(d) A policy subject to this section issued on or after January 1,
1997, shall either include language, which may be included by
endorsement, or be accompanied by a notice setting forth the elements
necessary to surrender the policy as required by this section or by
the insurer, if less.
(e) Nothing in this section shall be construed to limit an
existing statutory right to return a policy for surrender, nor shall
it limit a contractual provision that provides a greater right or
option to the policy owner.
(f) For a written request, for purposes of this section, "received"
means the first day that the written notice is delivered to the
address of the insurer or servicing agent authorized by the insurer
in writing to receive these requests on the insurer's behalf. An
insurer or servicing agent shall maintain a procedure for ensuring
that requests for surrender are logged or stamped on the date
received, and not on a later date due to the insurer's or servicing
agent's internal routing or delivery procedures. If this procedure is
not maintained, it shall be conclusively presumed that a request was
received on the delivery date shown on an express, certified, or
registered mail receipt form of the United States Postal Service or
by a commercial carrier, if delivered by commercial carrier, or the
earlier of (1) two business days after the request was postmarked by
the United States Postal Service or (2) one business day before the
date stamped received by the insurer or servicing agent. For purposes
of this subdivision, "business day" has the meaning set forth in
subdivision (g) of Section 1215. Postmarks generated by postage
meters not located at an office of the United States Postal Service
are to be disregarded.
(g) This section does not alter a contractual provision governing
calculation of cash or surrender or other values. The effective date
established by subdivision (b) is intended to establish a date
certain on which a policyholder may rely in determining when the
45-day period specified in subdivision (a) begins to run. Subdivision
(b) is not intended to advance a date otherwise provided by contract
that is triggered by a request to surrender. An insurer may request
information in addition to that listed in subdivision (b). However,
an insurer's request for additional information does not delay an
effective date established by a policyholder's compliance with
subdivision (b).
10165. This article shall not apply to any of the following:
(a) Reinsurance.
(b) Group insurance.
(c) Pure endowment.
(d) Annuity or reversionary annuity contract.
(e) 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.
(f) Term policy of decreasing amount, which provides no guaranteed
nonforfeiture or endowment benefits, on which each adjusted premium,
calculated as specified in Sections 10163, 10163.1, and 10163.2, 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.
(g) A 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 specifed in Sections 10161, 10162,
10163, 10163.1, and 10163.2, exceeds 2 1/2 percent of the amount of
insurance at the beginning of the same policy year, nor
(h) A 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 article, the
age at expiry for a joint-term life insurance policy shall be the
age at expiry of the oldest life.
10166. No agreement between the insurer and the policyholder or
applicant for insurance contrary to this article shall be held to
waive any of the provisions of this article.
10167. Any policy to which this article is applicable which does
not contain a paid-up nonforfeiture benefit shall be construed as
granting nonparticipating paid-up term insurance as a nonforfeiture
benefit under subdivision (a) Section 10160.
10167.5. (a) Whenever a nonforfeiture benefit is implemented by a
life insurer in connection with a defaulting policyowner, the insurer
shall provide a notice to the policyowner which explains that action
and refers the policyowner to the other available options, if any,
under the provisions of the policy.
(b) For purposes of this section, any notice to a policyholder
shall be in writing and shall be mailed to the last known address of
the policyowner shown on the records of the insurer.
(c) This section does not apply to any of the following:
(1) Reinsurance.
(2) Group insurance.
(3) Pure endowment.
(4) Annuity or reversionary annuity contract.
(5) Industrial insurance.
10159.1. This article is applicable only to policies and contracts
issued on or after the operative date as to such policies or
contracts of this article.
10159.2. After December 31, 1943, any insurer may file with the
commissioner a written notice of its election to comply with the
provisions of this article as to any or all of its policies after a
specified date before January 1, 1948. After the filing of such
notice, then upon such specified date, this article shall become
operative with respect to the policies specified in the notice and
which are thereafter issued by such insurer. As to all of its
policies with respect to which an insurer makes no such election, the
operative date of this article shall be January 1, 1948.
10160. Except as provided in Section 10165, no policy of life
insurance shall be delivered or issued for delivery in this state
unless it shall contain in substance the following provisions, or
corresponding provisions which are at least as favorable to the
defaulting or surrendering policyholder as are the minimum
requirements hereinafter specified and are essentially in compliance
with Section 10164.1 of this law:
(a) That, in the event of default in any premium payment after
premiums have been paid for at least one full year 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 hereinafter specified. In lieu of this stipulated
paid-up nonforfeiture benefit, the company may substitute, upon
proper request not later than 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.
(b) 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
or 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 hereinafter specified.
(c) 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.
(d) 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
hereinafter specified.
(e) 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 schedule 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 account of or secured by the
policy. At the option of the insurer such schedule may also show such
values and benefits for any year or years beyond the twentieth
policy year.
(f) A brief and general statement of the method to be used in
calculating the cash surrender value and the 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 with 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 account
of or secured by the policy.
Any of the foregoing provisions or portions thereof 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.
10161. Any cash surrender value available under the policy in the
event of default in a premium payment due on any policy anniversary,
whether or not required by Section 10160, 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 (a) the then present value of the
adjusted premiums as defined in Sections 10163, 10163.1, and 10163.2
corresponding to premiums which would have fallen due on and after
such anniversary, and (b) the amount of any indebtedness to the
company on the policy.
Provided, however, that for any policy issued on or after January
1, 1989, 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
section 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
January 1, 1989, 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 of 71, the cash surrender value referred to
in the first paragraph of this section 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
benefit, whether or not required by Section 10160, 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
company on the policy.
10162. Any paid-up nonforfeiture benefit available under the 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 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 article in the
absence of the condition that premiums shall have been paid for at
least a specified period.
10163. This section shall not apply to policies issued on or after
the operative date of Section 10163.2 as defined therein. Except as
provided in the third paragraph 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 (i) the then present value of the future guaranteed benefits
provided for by the policy; (ii) two percent (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 percent
(40%) of the adjusted premium for the first policy year; (iv)
twenty-five percent (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. In applying the percentages specified
in (iii) and (iv) above, no adjusted premium shall be deemed to
exceed four percent (4%) of the amount of insurance or uniform amount
equivalent thereto.
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 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 providing 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.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision unless such term
insurance benefits are disregarded under Section 10164 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 paragraphs of this section.
Except as otherwise provided in Section 10163.1, all adjusted
premiums and present values referred to in this article shall for all
policies of ordinary insurance be calculated on the basis of the
Commissioners 1941 Standard Ordinary Mortality Table; provided,
however, that for any category of ordinary insurance issued on female
risks, adjusted premiums and present values may be calculated, at
the option of the insurer, according to an age not more than three
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. However, 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 one hundred thirty percent (130%) of the rates
of mortality according to such applicable table; and 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.
10163.1. (a) In the case of ordinary policies issued on or after
the operative date of this subdivision as defined herein, all
adjusted premiums and present values referred to in this article
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 3 1/2 percent per annum except that a rate of interest not
exceeding 4 percent per annum may be used for all policies issued on
or after January 1, 1970, and prior to January 1, 1980, and a rate of
interest not exceeding 5 1/2 percent per annum may be used for all
such policies issued on or after January 1, 1980, except that for any
single premium whole life or endowment insurance policy a rate of
interest not exceeding 6 1/2 percent per annum may be used; 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 years younger than the actual age of the
insured; 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
may be not more than those shown in the Commissioners 1958 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 company and approved by the commissioner.
On or after January 1, 1961, any company may file with the
commissioner a written notice of its election to comply with the
provisions of this subdivision 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 this subdivision for such
company), this subdivision shall become operative with respect to the
ordinary policies thereafter issued by such company. If a company
makes no such election, the operative date of this subdivision for
such company shall be January 1, 1966.
(b) In the case of industrial policies issued on or after the
operative date of this subdivision as defined herein, all adjusted
premiums and present values referred to in this article 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 3 1/2
percent per annum except that a rate of interest not exceeding 4
percent per annum may be used for all such policies issued on or
after January 1, 1970, and prior to January 1, 1980, and a rate of
interest not exceeding 5 1/2 percent per annum may be used for all
such policies issued on or after January 1, 1980, except that for any
single premium whole life or endowment insurance policy a rate of
interest not exceeding 6 1/2 percent per annum may be used. 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 may be not 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 company and approved by the commissioner.
After September 20, 1963, any company may file with the
commissioner a written notice of its election to comply with the
provisions of this subdivision 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 this subdivision for such
company), this subdivision shall become operative with respect to the
industrial policies thereafter issued by such company. If a company
makes no such election, the operative date of this subdivision for
such company shall be January 1, 1968.
This section shall not apply to ordinary or industrial policies
issued on or after the operative date of Section 10163.2.
10163.2. (a) This section shall apply to all policies issued on or
after the operative date of this section as defined herein. Except as
provided in subdivision (g), 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 (1) the then present value of the future
guaranteed benefits provided for by the policy; (2) 1 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 (3) 125 percent of the
nonforfeiture net level premium as hereinafter defined. Provided,
however, that in applying the percentage specified in (3) no
nonforfeiture net level premium shall be deemed to exceed 4 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 section shall be the date as of which the rated age
of the insured is determined.
(b) 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 1 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.
(c) 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.
(d) Except as otherwise provided in subdivision (g), 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 (1) the sum of (A) the then present value of
the then future guaranteed benefits provided for by the policy and
(B) the additional expense allowance, if any, over (2) the then cash
surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of (1) 1
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 (2) 125 percent of the increase, if positive, in the
nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium shall be
equal to the result obtained by dividing (1) by (2) where:
(1) It equals the sum of:
(A) The nonforfeiture net level premium applicable prior to the
change times the present value of an annuity of 1 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
(B) The present value of the increase in future guaranteed
benefits provided for by the policy, and
(2) It equals the present value of an annuity of 1 percent per
annum payable on each anniversary of the policy on or subsequent to
the date of change on which a premium falls due.
(g) Notwithstanding any other provisions of this section 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.
(h) All adjusted premiums and present values referred to in this
article shall for all policies of ordinary insurance be calculated on
the basis of (1) the Commissioners 1980 Standard Ordinary Mortality
Table or (2) at the election of the company for any one 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 section for policies
issued in that calendar year. Provided, however, that:
(1) 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 section, for policies issued in the immediately
preceding calendar year.
(2) Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or
not required by Section 10160, 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.
(3) 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.
(4) 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.
(5) 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.
(6) Any ordinary mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that are approved by regulation promulgated or bulletin issued 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 Ten-Year Select Mortality
Factors or for the Commissioners 1980 Extended Term Insurance Table.
(7) Any industrial mortality tables, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that are approved by regulation promulgated or bulletin issued 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.
(i) 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 nearer
one-quarter of 1 percent.
(j) Notwithstanding any other provision in 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.
(k) After the effective date of this section, any company may file
with the commissioner a written notice of its election to comply
with the provision of this section after a specified date before
January 1, 1989, which shall be the operative date of this section
for such company. If a company makes no such election, the operative
date of this section for such company shall be January 1, 1989.
10163.3. In the case of any plan of life insurance that 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 that is of
such a nature that minimum values cannot be determined by the methods
described in Section 10160, 10161, 10162, 10163, 10163.1, or
10163.2, then:
(a) 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 Section 10160,
10161, 10162, 10163, 10163.1, or 10163.2.
(b) 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.
(c) The cash surrender values and paid-up nonforfeiture benefits
provided by the 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.
10163.35. (a) Notwithstanding any other provision of law, the form
of any policy, contract, or certificate providing life insurance that
is subject to this article shall be filed by the obligor under the
policy, contract, or certificate with the commissioner before it is
marketed, issued, delivered, or used in this state.
(b) Nothing contained in this section shall be construed as
requiring or providing for the prior approval by the commissioner of
forms of individual life insurance policies, contracts, or
certificates prior to the time the forms are marketed, issued,
delivered, or used in this state.
10164. 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 Sections 10161, 10162, 10163,
10163.1, and 10163.2 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 Section 10161,
additional benefits payable (a) in the event of death or
dismemberment by accident or accidental means, (b) in the event of
total and permanent disability, (c) as reversionary annuity or
deferred reversionary annuity benefits, (d) as term insurance
benefits provided by a rider or supplemental policy provision to
which, if issued as a separate policy, this article would not apply,
(e) 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 26, is
uniform in amount after the child's age is one, and has not become
paid up by reason of the death of a parent of the child, and (f) 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 article, and no such additional benefits
shall be required to be included in any paid-up nonforfeiture
benefits.
10164.1. This section shall apply to all policies issued on or
after January 1, 1986. 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 1 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
(a) the greater of zero and the basic cash value hereinafter
specified 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 hereinafter defined, 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 Section 10161 or 10163 whichever is applicable, shall be
the same as are the effects specified in Section 10161 or 10163
whichever is applicable, on the cash surrender values defined in that
section.
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 Section 10163 or 10163.2 whichever is applicable. Except
as is required by the next succeeding sentence of this paragraph,
such percentage:
(a) Shall 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 1 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.
(b) Must be such that no percentage after the later of the two
policy anniversaries specified in subdivision (a) 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 Section 10163 or 10163.2 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
section 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 sections of this article. The cash
surrender values 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 Sections 10160, 10161,
10162, 10163.2, and 10164. 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 items (a) through (f) in
Section 10164 shall conform with the principles of this section.
10164.2. (a) For a policy of individual life insurance that is
surrendered by the policy owner, the insurer shall return to the
owner all moneys due in relation to that policy as expeditiously as
possible, but in no event more than 45 days from the date the
surrender is effective as provided in subdivision (b). However, this
section does not supersede the provisions of subdivision (f) of
Section 10160 empowering an insurer to defer payment of cash
surrender value for up to six months, to the extent that deferral is
necessary to assure the solvency of the insurer.
(b) Unless a later date permitted by the policy (but not later
than 45 days after the request is received) is requested by the
policy owner, a surrender of a life insurance policy is effective on
the date the request is received, if the request is made to the
insurer or servicing agent authorized by the insurer in writing to
receive these requests on the insurer's behalf and contains the
elements specified by the insurer in the contract. The insurer may
require the request be in writing. The insurer may require some or
all of the following elements, but shall not require more:
(1) A statement that makes it clear that the policy owner intends
to surrender, in whole or in part, the contract in question.
(2) The policy number of the policy to be surrendered.
(3) The name of the insured on the policy to be surrendered.
(4) The signature of the owner of the policy and, if required by
the policy or by a legally binding document of which the insurer has
actual notice, the signature of a collateral assignee, irrevocable
beneficiary, or other person having an interest in the policy through
the legally binding document.
(5) Either the policy itself, or, in lieu of the policy, a
statement that the policy has been lost or destroyed.
(c) When the policy owner requests of an insurer or servicing
agent information about surrendering a policy, the insurer or
servicing agent shall provide, as expeditiously as possible, a
written notice setting forth either the requirements of this section
or the insurer's requirements, if less.
(d) A policy subject to this section issued on or after January 1,
1997, shall either include language, which may be included by
endorsement, or be accompanied by a notice setting forth the elements
necessary to surrender the policy as required by this section or by
the insurer, if less.
(e) Nothing in this section shall be construed to limit an
existing statutory right to return a policy for surrender, nor shall
it limit a contractual provision that provides a greater right or
option to the policy owner.
(f) For a written request, for purposes of this section, "received"
means the first day that the written notice is delivered to the
address of the insurer or servicing agent authorized by the insurer
in writing to receive these requests on the insurer's behalf. An
insurer or servicing agent shall maintain a procedure for ensuring
that requests for surrender are logged or stamped on the date
received, and not on a later date due to the insurer's or servicing
agent's internal routing or delivery procedures. If this procedure is
not maintained, it shall be conclusively presumed that a request was
received on the delivery date shown on an express, certified, or
registered mail receipt form of the United States Postal Service or
by a commercial carrier, if delivered by commercial carrier, or the
earlier of (1) two business days after the request was postmarked by
the United States Postal Service or (2) one business day before the
date stamped received by the insurer or servicing agent. For purposes
of this subdivision, "business day" has the meaning set forth in
subdivision (g) of Section 1215. Postmarks generated by postage
meters not located at an office of the United States Postal Service
are to be disregarded.
(g) This section does not alter a contractual provision governing
calculation of cash or surrender or other values. The effective date
established by subdivision (b) is intended to establish a date
certain on which a policyholder may rely in determining when the
45-day period specified in subdivision (a) begins to run. Subdivision
(b) is not intended to advance a date otherwise provided by contract
that is triggered by a request to surrender. An insurer may request
information in addition to that listed in subdivision (b). However,
an insurer's request for additional information does not delay an
effective date established by a policyholder's compliance with
subdivision (b).
10165. This article shall not apply to any of the following:
(a) Reinsurance.
(b) Group insurance.
(c) Pure endowment.
(d) Annuity or reversionary annuity contract.
(e) 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.
(f) Term policy of decreasing amount, which provides no guaranteed
nonforfeiture or endowment benefits, on which each adjusted premium,
calculated as specified in Sections 10163, 10163.1, and 10163.2, 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.
(g) A 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 specifed in Sections 10161, 10162,
10163, 10163.1, and 10163.2, exceeds 2 1/2 percent of the amount of
insurance at the beginning of the same policy year, nor
(h) A 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 article, the
age at expiry for a joint-term life insurance policy shall be the
age at expiry of the oldest life.
10166. No agreement between the insurer and the policyholder or
applicant for insurance contrary to this article shall be held to
waive any of the provisions of this article.
10167. Any policy to which this article is applicable which does
not contain a paid-up nonforfeiture benefit shall be construed as
granting nonparticipating paid-up term insurance as a nonforfeiture
benefit under subdivision (a) Section 10160.
10167.5. (a) Whenever a nonforfeiture benefit is implemented by a
life insurer in connection with a defaulting policyowner, the insurer
shall provide a notice to the policyowner which explains that action
and refers the policyowner to the other available options, if any,
under the provisions of the policy.
(b) For purposes of this section, any notice to a policyholder
shall be in writing and shall be mailed to the last known address of
the policyowner shown on the records of the insurer.
(c) This section does not apply to any of the following:
(1) Reinsurance.
(2) Group insurance.
(3) Pure endowment.
(4) Annuity or reversionary annuity contract.
(5) Industrial insurance.
