(a) This section shallbe known as the Standard Nonforfeiture Law for Life Insurance.
(b) In the case ofpolicies issued on or after the operative date of this section, as defined insubsection (h), no policy of life insurance, except as stated in subsection(g), shall be delivered or issued for delivery in this State unless it shallcontain in substance the following provisions, or corresponding provisionswhich in the opinion of the Commissioner are at least as favorable to thedefaulting or surrendering policyholder as are the minimum requirementshereinafter specified and are essentially in compliance with subsection (f1) ofthis section:
(1) That, in the eventof default in any premium payment after premiums have been paid for at leastone full year in the case of ordinary insurance or three full years in the caseof industrial insurance, the company will grant, upon proper request not laterthan 60 days after the due date of the premium in default, a paid‑upnonforfeiture benefit on a plan stipulated in the policy, effective as of suchdue date, of such amount as may be hereinafter specified. In lieu of suchstipulated paid‑up nonforfeiture benefit, the company may substitute,upon proper request not later than 60 days after the due date of the premium indefault, an actuarially equivalent alternative paid‑up nonforfeiturebenefit which provides a greater amount or longer period of death benefits or,if applicable, a greater amount or earlier payment of endowment benefits.
(2) That, upon surrenderof the policy within 60 days after the due date of any premium payment indefault after premiums have been paid for at least three full years in the caseof ordinary insurance or five full years in the case of industrial insurance,the company will pay, in lieu of any paid‑up nonforfeiture benefit, acash surrender value of such amount as may be hereinafter specified.
(3) That a specifiedpaid‑up nonforfeiture benefit shall become effective as specified in thepolicy unless the person entitled to make such election elects anotheravailable option not later than 60 days after the due date of the premium indefault. Nothing herein shall prevent the use of an automatic premium loanprovision.
(4) That, if the policyshall have become paid up by completion of all premium payments or if it iscontinued under any paid‑up nonforfeiture benefit which became effectiveon or after the third policy anniversary in the case of ordinary insurance orthe fifth policy anniversary in the case of industrial insurance, the companywill pay, upon surrender of the policy within 30 days after any policyanniversary, a cash surrender value of such amount as may be hereinafterspecified.
(5) In the case ofpolicies which cause on a basis guaranteed in the policy unscheduled changes inbenefits or premiums, or which provide an option for changes in benefits orpremiums other than a change to a new policy, a statement of the mortalitytable, interest rate, and method used in calculating cash surrender values andthe paid‑up nonforfeiture benefits available under the policy. In thecase of all other policies, a statement of the mortality table and interestrate used in calculating the cash surrender values and the paid‑upnonforfeiture benefits available under the policy, together with a tableshowing the cash surrender value, if any, and paid‑up nonforfeiturebenefit, if any available under the policy on each policy anniversary eitherduring the first 20 policy years or during the term of the policy, whichever isshorter, such values and benefits to be calculated upon the assumption thatthere are no dividends or paid‑up additions credited to the policy andthat there is no indebtedness to the company on the policy.
(6) A statement that thecash surrender values and the paid‑up nonforfeiture benefits availableunder the policy are not less than the minimum values and benefits required byor pursuant to the insurance law of the state in which the policy is delivered;an explanation of the manner in which the cash surrender values and the paid‑upnonforfeiture benefits are altered by the existence of any paid‑upadditions credited to the policy or any indebtedness to the company on thepolicy; if a detailed statement of the method of computation of the values andbenefits shown in the policy is not stated therein, a statement that suchmethod of computation has been filed with the Commissioner in which the policyis delivered; and a statement of the method to be used in calculating the cashsurrender value and paid‑up nonforfeiture benefit available under thepolicy on any policy anniversary beyond the last anniversary for which suchvalues and benefits are consecutively shown in the policy.
Any of the foregoingprovisions or portions thereof not applicable by reason of the plan ofinsurance may, to the extent inapplicable, be omitted from the policy.
The company shall reserve theright to defer the payment of any cash surrender value for a period of sixmonths after demand therefor with surrender of the policy.
(c) Any cash surrendervalue available under the policy in the event of default in a premium paymentdue on any policy anniversary, whether or not required by subsection (b), shallbe an amount not less than the excess, if any, of the present value, on suchanniversary, of the future guaranteed benefits which would have been providedfor by the policy, including any existing paid‑up additions, if there hadbeen no default, over the sum of (i) the then present value of the adjustedpremiums as defined in subsection (e), corresponding to premiums which wouldhave fallen due on and after such anniversary, and (ii) the amount of anyindebtedness to the company on the policy.
Provided, however, that forany policy issued on or after the operative date of subdivision (4) ofsubsection (e) as defined therein, which provides supplemental life insuranceor annuity benefits at the option of the insured and for an identifiableadditional premium by rider or supplemental policy provision, the cashsurrender value referred to in the first paragraph of this subsection shall bean amount not less than the sum of the cash surrender value as defined in suchparagraph for an otherwise similar policy issued at the same age without suchrider or supplemental policy provision and the cash surrender value as definedin such paragraph for a policy which provides only the benefits otherwiseprovided by such rider or supplemental policy provision.
Provided, further, that forany family policy issued on or after the operative date of subdivision (4) ofsubsection (e) as defined therein, which defines a primary insured and providesterm insurance on the life of the spouse of the primary insured expiring beforethe spouse's age 71, the cash surrender value referred to in the first paragraphof this subsection shall be an amount not less than the sum of the cashsurrender value as defined in such paragraph for an otherwise similar policyissued at the same age without such term insurance on the life of the spouseand cash surrender value as defined in such paragraph for a policy whichprovides only the benefits otherwise provided by such term insurance on thelife of the spouse.
Any cash surrender valueavailable within 30 days after any policy anniversary under any policy paid upby completion of all premium payments or any policy continued under any paid‑upnonforfeiture benefit, whether or not required by subsection (b), shall be anamount not less than the present value, on such anniversary, of the futureguaranteed benefits provided for by the policy, including any existing paid‑upadditions, decreased by any indebtedness to the company on the policy.
(d) Any paid‑upnonforfeiture benefit available under the policy in the event of default in apremium payment due on any policy anniversary shall be such that its presentvalue as of such anniversary shall be at least equal to the cash surrendervalue then provided for by the policy or, if none is provided for, at leastequal to that cash surrender value which would have been required by thissection in the absence of the condition that premiums shall have been paid forat least a specified period.
(e) (1) Thissubdivision (1) of subsection (e) shall not apply to policies issued on orafter the operative date of subdivision (4) of subsection (e) as definedtherein. Except as provided in the third paragraph of this subdivision, theadjusted premiums for any policy shall be calculated on an annual basis andshall be such uniform percentage of the respective premiums specified in thepolicy for each policy year, excluding any extra premiums charged because ofimpairments or special hazards, that the present value, at the date of issue ofthe policy, of all such adjusted premiums shall be equal to the sum of (i) thethen present value of the future guaranteed benefits provided for by thepolicy; (ii) two percent (2%) of the amount of insurance, if the insurance beuniform in amount, or of the equivalent uniform amount, as hereinafter defined,if the amount of insurance varies with duration of the policy; (iii) fortypercent (40%) of the adjusted premium for the first policy year; (iv) twenty‑fivepercent (25%) of either the adjusted premium for the first policy year or theadjusted premium for a whole life policy of the same uniform or equivalentuniform amount with uniform premiums for the whole of life issued at the sameage for the same amount of insurance, whichever is less. Provided, however,that in applying the percentages specified in (iii) and (iv) above, no adjustedpremium shall be deemed to exceed four percent (4%) of the amount of insuranceor uniform amount equivalent thereto. The date of issue of a policy for thepurpose of this subsection shall be the date as of which the rated age of theinsured is determined.
In the caseof a policy providing an amount of insurance varying with duration of thepolicy, the equivalent uniform amount thereof for the purpose of this sectionshall be deemed to be the uniform amount of insurance provided by an otherwisesimilar 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 varywith duration and the benefits under which have the same present value at thedate of issue as the benefits under the policy, provided, however, that in thecase of a policy providing a varying amount of insurance issued on the life ofa child under age 10, the equivalent uniform amount may be computed as thoughthe amount of insurance provided by the policy prior to the attainment of age10 were the amount provided by such policy at age 10.
The adjustedpremiums for any policy providing term insurance benefits by rider orsupplemental policy provision shall be equal to (i) the adjusted premiums foran otherwise similar policy issued at the same age without such term insurancebenefits, increased, during the period for which premiums for such terminsurance benefits are payable, by (ii) the adjusted premiums for such terminsurance, the foregoing items (i) and (ii) being calculated separately and asspecified in the first two paragraphs of this subsection except that, for thepurposes of (ii), (iii) and (iv) of the first such paragraph, the amount ofinsurance or equivalent uniform amount of insurance used in the calculation ofthe adjusted premiums referred to in (ii) of this paragraph shall be equal tothe excess of the corresponding amount determined for the entire policy overthe amount used in the calculation of the adjusted premiums in (i).
Except asotherwise provided in subdivisions (2) and (3) of this subsection, all adjustedpremiums and present values referred to in this section shall for all policiesof ordinary insurance be calculated on the basis of the Commissioner's 1941Standard Ordinary Mortality Table, provided that for any category of ordinaryinsurance issued on female risks, adjusted premiums and present values may becalculated according to an age not more than three years younger than theactual age of the insured, and such calculations for all policies of industrialinsurance shall be made on the basis of the 1941 Standard Industrial MortalityTable. All calculations shall be made on the basis of the rate of interest, notexceeding three and one‑half percent (3 1/2%) per annum, specified in thepolicy for calculating cash surrender values and paid‑up nonforfeiturebenefits. Provided, however, that in calculating the present value of any paid‑upterm insurance with accompanying pure endowment, if any, offered as anonforfeiture benefit, the rates of mortality assumed may not be more than onehundred and thirty percent (130%) of the rates of mortality according to suchapplicable table. Provided, further, that for insurance issued on a substandardbasis, the calculation of any such adjusted premiums and present values may bebased on such other table of mortality as may be specified by the company andapproved by the Commissioner.
(2) This subdivision (2)of subsection (e) shall not apply to ordinary policies issued on or after theoperative date of subdivision (4) of subsection (e) as defined therein. In thecase of ordinary policies issued on or after the operative date of thissubdivision (2) as defined herein, all adjusted premiums and present valuesreferred to in this section shall be calculated on the basis of theCommissioner's 1958 Standard Ordinary Mortality Table and the rate of interestspecified in the policy for calculating cash surrender values and paid‑upnonforfeiture benefits, provided that such rate of interest shall not exceedthree and one‑half percent (3 1/2%) per annum except that a rate ofinterest not exceeding four percent (4%) per annum may be used for policiesissued on or after July 1, 1975, and prior to April 19, 1979, and a rate ofinterest not exceeding five and one‑half percent (5 1/2%) per annum maybe used for policies issued on or after April 19, 1979, and, provided that forany category of ordinary insurance issued on female risks, adjusted premiumsand present values may be calculated according to an age not more than sixyears younger than the actual age of the insured; provided, however, that incalculating the present value of any paid‑up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, therates of mortality assumed may be not more than those shown in theCommissioner's 1958 Extended Term Insurance Table. Provided, further, that forinsurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on such other table of mortality asmay be specified by the company and approved by the Commissioner.
After May 12,1959, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this subdivision (2) after aspecified date before January 1, 1966. After the filing of such notice, thenupon such specified date (which shall be the operative date of this subdivision(2) for such company), this subdivision (2) shall become operative with respectto the ordinary policies thereafter issued by such company. If a company makesno such election, the operative date of this subdivision (2) for such companyshall be January 1, 1966.
(3) This subdivision (3)of subsection (e) shall not apply to industrial policies issued on or after theoperative date of subdivision (4) of subsection (e) as defined therein. In thecase of industrial policies issued on or after the operative date of thissubdivision (3) as defined herein, all adjusted premiums and present valuesreferred to in this section shall be calculated on the basis of theCommissioner's 1961 Standard Industrial Mortality Table and the rate ofinterest specified in the policy for calculating cash surrender values and paid‑upnonforfeiture benefits, provided that such rate of interest shall not exceedthree and one‑half percent (3 1/2%) per annum except that a rate ofinterest not exceeding four percent (4%) per annum may be used for policiesissued on or after July 1, 1975, and prior to April 19, 1979, and a rate ofinterest not exceeding five and one‑half percent (5 1/2%) per annum maybe used for policies issued on or after April 19, 1979; provided, however, thatin calculating the present value of any paid‑up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, the ratesof mortality assumed may be not more than those shown in the Commissioner's1961 Industrial Extended Term Insurance Table. Provided, further, that forinsurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on such other table of mortality asmay be specified by the company and approved by the Commissioner.
After June11, 1963, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this subdivision (3) after aspecified date before January 1, 1968. After the filing of such notice, thenupon such specified date (which shall be the operative date of this subdivision(3) for such company), this subdivision (3) shall become operative with respectto the industrial policies thereafter issued by such company. If a companymakes no such election, the operative date of this subdivision (3) for suchcompany shall be January 1, 1968.
(4) a. Thissubdivision shall apply to all policies issued on or after the operative dateof this subdivision (4) of subsection (e) as defined herein. Except as providedin paragraph g of this subdivision, the adjusted premiums for any policy shallbe calculated on an annual basis and shall be such uniform percentage of therespective premiums specified in the policy for each policy year, excludingamounts payable as extra premiums to cover impairments or special hazards andalso excluding any uniform annual contract charge or policy fee specified inthe policy in a statement of the method to be used in calculating the cashsurrender values and paid‑up nonforfeiture benefits, that the presentvalue, at the date of issue of the policy, of all adjusted premiums shall beequal to the sum of (i) the then present value of the future guaranteedbenefits provided for by the policy; (ii) one percent (1%) of either the amountof insurance, if the insurance be uniform in amount, or the average amount ofinsurance at the beginning of each of the first 10 policy years; and (iii) onehundred twenty‑five percent (125%) of the nonforfeiture net level premiumas hereinafter defined. Provided, however, that in applying the percentagespecified in (iii) above no nonforfeiture net level premium shall be deemed toexceed four percent (4%) of either the amount of insurance, if the insurance beuniform in amount, or the average amount of insurance at the beginning of eachof the first 10 policy years. The date of issue of a policy for the purpose ofthis subdivision shall be the date as of which the rated age of the insured isdetermined.
b. The nonforfeiturenet level premium shall be equal to the present value, at the date of issue ofthe policy, of the guaranteed benefits provided for by the policy divided bythe present value, at the date of issue of the policy, of an annuity of one perannum payable on the date of issue of the policy and on each anniversary ofsuch policy on which a premium falls due.
c. In the case ofpolicies which cause on a basis guaranteed in the policy unscheduled changes inbenefits or premiums, or which provide an option for changes in benefits orpremiums other than a change to a new policy, the adjusted premiums and presentvalues shall initially be calculated on the assumption that future benefits andpremiums do not change from those stipulated at the date of issue of thepolicy. At the time of any such change in the benefits or premiums the futureadjusted premiums, nonforfeiture net level premiums and present values shall berecalculated on the assumption that future benefits and premiums do not changefrom those stipulated by the policy immediately after the change.
d. Except as otherwiseprovided in paragraph g of this subdivision, the recalculated future adjustedpremiums for any such policy shall be such uniform percentage of the respectivefuture premiums specified in the policy for each policy year, excluding amountspayable as extra premiums to cover impairments and special hazards, and alsoexcluding any uniform annual contract charge or policy fee specified in thepolicy in a statement of the method to be used in calculating the cashsurrender values and paid‑up nonforfeiture benefits, that the presentvalue, at the time of change to the newly defined benefits or premiums, of allsuch future adjusted premiums shall be equal to the excess of (A) the sum of(i) the then present value of the then future guaranteed benefits provided forby the policy and (ii) the additional expense allowance, if any, over (B) thethen cash surrender value, if any, or present value of any paid‑upnonforfeiture benefit under the policy.
e. The additionalexpense allowance, at the time of the change to the newly defined benefits orpremiums, shall be the sum of (i) one percent (1%) of the excess, if positive,of the average amount of insurance at the beginning of each of the first 10policy years subsequent to the change over the average amount of insuranceprior to the change at the beginning of each of the first 10 policy yearssubsequent to the time of the most recent previous change, or, if there hasbeen no previous change, the date of issue of the policy; and (ii) one hundredtwenty‑five percent (125%) of the increase, if positive, in thenonforfeiture net level premium.
f. The recalculatednonforfeiture net level premium shall be equal to the result obtained bydividing (A) by (B) where
(A) Equals the sum of
(i) The nonforfeiturenet level premium applicable prior to the change times the present value of anannuity of one per annum payable on each anniversary of the policy on orsubsequent to the date of the change on which a premium would have fallen duehad the change not occurred, and
(ii) The present valueof the increase in future guaranteed benefits provided for by the policy, and
(B) Equals the presentvalue of an annuity of one per annum payable on each anniversary of the policyon or subsequent to the date of change on which a premium falls due.
g. Notwithstanding anyother provisions of this subdivision to the contrary, in the case of a policyissued on a substandard basis which provides reduced graded amounts ofinsurance so that, in each policy year, such policy has the same tabularmortality cost as an otherwise similar policy issued on the standard basiswhich provides higher uniform amounts of insurance, adjusted premiums andpresent values for such substandard policy may be calculated as if it wereissued to provide such higher uniform amounts of insurance on the standardbasis.
h. All adjustedpremiums and present values referred to in this section shall for all policiesof ordinary insurance be calculated on the basis of (i) the Commissioner's 1980Standard Ordinary Mortality Table or (ii) at the election of the company forany one or more specified plans of life insurance, the Commissioner's 1980Standard Ordinary Mortality Table with Ten‑Year Select Mortality Factors;shall for all policies of industrial insurance be calculated on the basis ofthe Commissioner's 1961 Standard Industrial Mortality Table; and shall for allpolicies issued in a particular calendar year be calculated on the basis of arate of interest not exceeding the nonforfeiture interest rate as defined inthis subdivision for policies issued in that calendar year. Provided, however,that:
1. At the option of thecompany, calculations for all policies issued in a particular calendar year maybe made on the basis of a rate of interest not exceeding the nonforfeitureinterest rate, as defined in this subdivision, for policies issued in theimmediately preceding calendar year.
2. Under any paid‑upnonforfeiture benefit, including any paid‑up dividend additions, any cashsurrender value available, whether or not required by subsection (b), shall becalculated on the basis of the mortality table and rate of interest used indetermining the amount of such paid‑up nonforfeiture benefit and paid‑updividend additions, if any.
3. A company maycalculate the amount of any guaranteed paid‑up nonforfeiture benefitincluding any paid‑up additions under the policy on the basis of aninterest rate no lower than that specified in the policy for calculating cashsurrender values.
4. In calculating thepresent value of any paid‑up term insurance with accompanying pureendowment, if any, offered as a nonforfeiture benefit, the rates of mortalityassumed may be not more than those shown in the Commissioner's 1980 ExtendedTerm Insurance Table for policies of ordinary insurance and not more than theCommissioner's 1961 Industrial Extended Term Insurance Table for policies ofindustrial insurance.
5. For insurance issuedon a substandard basis, the calculation of any such adjusted premiums andpresent values may be based on appropriate modifications of the aforementionedtables.
6. Any ordinarymortality tables, adopted after 1980 by the NAIC, that are approved byregulation promulgated by the Commissioner for use in determining the minimumnonforfeiture standard may be substituted for the Commissioner's 1980 StandardOrdinary Mortality Table with or without Ten‑Year Select MortalityFactors or for the Commissioner's 1980 Extended Term Insurance Table.
7. Any industrialmortality tables, adopted after 1980 by the NAIC, that are approved byregulation promulgated by the Commissioner for use in determining the minimumnonforfeiture standard may be substituted for the Commissioner's 1961 StandardIndustrial Mortality Table or the Commissioner's 1961 Industrial Extended TermInsurance Table.
i. The nonforfeitureinterest rate per annum for any policy issued in a particular calendar yearshall be equal to one hundred and twenty‑five percent (125%) of thecalendar year statutory valuation interest rate for such policy as defined inthe Standard Valuation Law, rounded to the nearer one quarter of one percent(1/4 of 1%).
j. Notwithstanding anyother provision in this Chapter to the contrary, any refiling of nonforfeiturevalues or their methods of computation for any previously approved policy formwhich involves only a change in the interest rate or mortality table used tocompute nonforfeiture values shall not require refiling of any other provisionsof that policy form.
k. After the effectivedate of this subdivision (4) of subsection (e), any company may file with theCommissioner a written notice of its election to comply with the provisions ofthis subdivision after a specified date before January 1, 1989, which shall bethe operative date of this subdivision for such company. If a company makes nosuch election, the operative date of this subdivision for such company shall beJanuary 1, 1989.
(e1) In the case of anyplan of life insurance which provides for future premium determination, theamounts of which are to be determined by the insurance company based on thenestimates of future experience, or in the case of any plan of life insurancewhich is of such a nature that minimum values cannot be determined by themethods described in subsections (b), (c), (d), or (e) herein, then:
(1) The Commissionermust be satisfied that the benefits provided under the plan are substantiallyas favorable to policyholders and insureds as the minimum benefits otherwiserequired by subsections (b), (c), (d), or (e) herein;
(2) The Commissionermust be satisfied that the benefits and the pattern of premiums of that planare not such as to mislead prospective policyholders or insureds;
(3) The cash surrendervalues and paid‑up nonforfeiture benefits provided by such plan must notbe less than the minimum values and benefits required for the plan computed bya method consistent with the principles of this Standard Nonforfeiture Law, asdetermined by regulations promulgated by the Commissioner;
(4) Notwithstanding anyother provision in the laws of this State, any policy, contract, or certificateproviding life insurance under any such plan must be affirmatively approved bythe Commissioner before it can be marketed, issued, delivered, or used in thisState.
(f) Any cash surrendervalue and any paid‑up nonforfeiture benefit, available under the policyin the event of default in a premium payment due at any time other than on thepolicy anniversary, shall be calculated with allowance for the lapse of timeand the payment of fractional premiums beyond the last preceding policyanniversary. Any values referred to in subsections (c), (d) and (e) may becalculated upon the assumption that any death benefit is payable at the end ofthe policy year of death. The net value of any paid‑up additions, otherthan paid‑up term additions, shall be not less than the amounts used toprovide such additions. Notwithstanding the provisions of Section 3 [subsection(c)], additional benefits payable (i) in the event of death or dismemberment byaccident or accidental means, (ii) in the event of total and permanentdisability, (iii) as reversionary annuity or deferred reversionary annuitybenefits, (iv) as term insurance benefits provided by a rider or supplementalpolicy provision to which, if issued as a separate policy, this section wouldnot apply, (v) as term insurance on the life of a child or on the lives ofchildren provided in a policy on the life of a parent of the child, if suchterm insurance expires before the child's age is 26, is uniform in amount afterthe child's age is one, and has not become paid up by reason of the death of aparent of the child, and (vi) as other policy benefits additional to lifeinsurance and endowment benefits, and premiums for all such additionalbenefits, shall be disregarded in ascertaining cash surrender values andnonforfeiture benefits required by this section, and no such additionalbenefits shall be required to be included in any paid‑up nonforfeiturebenefits.
(f1) This subsection, inaddition to all other applicable subsections of this section, shall apply toall policies issued on or after January 1, 1985. Any cash surrender valueavailable under the policy in the event of default in a premium payment due onany policy anniversary shall be in an amount which does not differ by more thantwo‑tenths of one percent (2/10 of 1%) of either the amount of insurance,if the insurance be uniform in amount, or the average amount of insurance at thebeginning of each of the first 10 policy years, from the sum of (1) the greaterof zero and the basic cash value hereinafter specified and (2) the presentvalue of any existing paid‑up additions less the amount of anyindebtedness to the company under the policy.
The basic cash value shall beequal to the present value, on such anniversary, of the future guaranteedbenefits which would have been provided for by the policy, excluding anyexisting paid‑up additions and before deduction of any indebtedness tothe company, if there had been no default, less the then present value of thenonforfeiture factors, as hereinafter defined, corresponding to premiums whichwould have fallen due on and after such anniversary. Provided, however, thatthe effects on the basic cash value of supplemental life insurance or annuitybenefits or of family coverage, as described in subsection (c) or (e)(1),whichever is applicable, shall be the same as are the effects specified insubsection (c) or (e)(1), whichever is applicable, on the cash surrender valuesdefined in that subsection.
The nonforfeiture factor foreach policy year shall be an amount equal to a percentage of the adjustedpremium for the policy year, as defined in subsection (e)(1) or (e)(4),whichever is applicable. Except as is required by the next succeeding sentenceof this paragraph, such percentage:
(1) Must be the samepercentage for each policy year between the second policy anniversary and thelater of (i) the fifth policy anniversary and (ii) the first policy anniversaryat which there is available under the policy a cash surrender value in anamount, before including any paid‑up additions and before deducting anyindebtedness, of at least two‑tenths of one percent (2/10 of 1%) ofeither the amount of insurance, if the insurance be uniform in amount, or theaverage amount of insurance at the beginning of each of the first 10 policyyears; and
(2) Must be such that nopercentage after the later of the two policy anniversaries specified in thepreceding item (1) may apply to fewer than five consecutive policy years.
Provided, that no basic cashvalue may be less than the value which would be obtained if the adjustedpremiums for the policy, as defined in subsection (e)(1) or (e)(4), whicheveris applicable, were substituted for the nonforfeiture factors in thecalculation of the basic cash value.
All adjusted premiums andpresent values referred to in this subsection shall for a particular policy becalculated on the same mortality and interest bases as are used indemonstrating the policy's compliance with the other subsections of thissection. The cash surrender values referred to in this subsection shall includeany endowment benefits provided for by the policy.
Any cash surrender valueavailable other than in the event of default in a premium payment due on apolicy anniversary, and the amount of any paid‑up nonforfeiture benefitavailable under the policy in the event of default in a premium payment shallbe determined in manners consistent with the manners specified for determiningthe analogous minimum amounts in subsections (b), (c), (d), (e)(4), and (f).The amounts of any cash surrender values and of any paid‑up nonforfeiturebenefits granted in connection with additional benefits such as those listed asitems (i) through (vi) in subsection (f) shall conform with the principles ofthis subsection (f1).
(g) The provisions ofthis section shall not apply to any of the following:
(1) Industrial sickbenefit insurance as defined in Articles 1 through 64 of this Chapter,
(2) Reinsurance,
(3) Group insurance,
(4) Pure endowment,
(5) Annuity orreversionary annuity contract,
(6) Term policy ofuniform amount, which provides no guaranteed nonforfeiture or endowmentbenefits, or renewal thereof, of 20 years or less, for which uniform premiumsare payable during the entire term of the policy,
(7) Term policy ofdecreasing amount, which provides no guaranteed nonforfeiture or endowmentbenefits, on which each adjusted premium, calculated as specified in subsection(e), is less than the adjusted premium so calculated, on a term policy ofuniform amount, or renewal thereof, which provides no guaranteed nonforfeitureor endowment benefits, issued at the same age and for the same initial amountof insurance and for a term of 20 years or less expiring before age 71, forwhich uniform premiums are payable during the entire term of the policy,
(8) Policy, whichprovides no guaranteed nonforfeiture or endowment benefits, for which no cashsurrender value, if any, or present value of any paid‑up nonforfeiturebenefit, at the beginning of any policy year, calculated as specified insubsections (c), (d) and (e), exceeds two and one‑half percent (2 1/2%)of the amount of insurance at the beginning of the same policy year, nor
(9) Policy which shallbe delivered outside this State through an agent or other representative of thecompany issuing the policy.
For purposes of determining theapplicability of this section, the age at expiry for a joint term lifeinsurance policy shall be the age at expiry of the oldest life.
(h) After March 6,1945, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this section after a specified datebefore January 1, 1950. After the filing of such notice then upon suchspecified date (which shall be the operative date for such company) thissection shall become operative with respect to the policies thereafter issuedby such company. If a company makes no such election, the operative date ofthis section for such company shall be January 1, 1950.
(i) For any singlepremium whole life or endowment insurance policy subject to subdivisions (e)(2)and (e)(3) of this section, a rate of interest not exceeding six and one‑halfpercent (6 1/2%) per annum may be used. (1945, c. 379; 1959, c. 484,s. 2; 1961, c. 255, ss. 4‑7; 1963, c. 791, ss. 3, 4; 1975, c. 603, ss. 2,3; 1979, c. 409, ss. 7‑9; 1981, c. 761, ss. 6‑14; 1991, c. 720, ss.19, 31; 1993, c. 452, ss. 57‑59.)
(a) This section shallbe known as the Standard Nonforfeiture Law for Life Insurance.
(b) In the case ofpolicies issued on or after the operative date of this section, as defined insubsection (h), no policy of life insurance, except as stated in subsection(g), shall be delivered or issued for delivery in this State unless it shallcontain in substance the following provisions, or corresponding provisionswhich in the opinion of the Commissioner are at least as favorable to thedefaulting or surrendering policyholder as are the minimum requirementshereinafter specified and are essentially in compliance with subsection (f1) ofthis section:
(1) That, in the eventof default in any premium payment after premiums have been paid for at leastone full year in the case of ordinary insurance or three full years in the caseof industrial insurance, the company will grant, upon proper request not laterthan 60 days after the due date of the premium in default, a paid‑upnonforfeiture benefit on a plan stipulated in the policy, effective as of suchdue date, of such amount as may be hereinafter specified. In lieu of suchstipulated paid‑up nonforfeiture benefit, the company may substitute,upon proper request not later than 60 days after the due date of the premium indefault, an actuarially equivalent alternative paid‑up nonforfeiturebenefit which provides a greater amount or longer period of death benefits or,if applicable, a greater amount or earlier payment of endowment benefits.
(2) That, upon surrenderof the policy within 60 days after the due date of any premium payment indefault after premiums have been paid for at least three full years in the caseof ordinary insurance or five full years in the case of industrial insurance,the company will pay, in lieu of any paid‑up nonforfeiture benefit, acash surrender value of such amount as may be hereinafter specified.
(3) That a specifiedpaid‑up nonforfeiture benefit shall become effective as specified in thepolicy unless the person entitled to make such election elects anotheravailable option not later than 60 days after the due date of the premium indefault. Nothing herein shall prevent the use of an automatic premium loanprovision.
(4) That, if the policyshall have become paid up by completion of all premium payments or if it iscontinued under any paid‑up nonforfeiture benefit which became effectiveon or after the third policy anniversary in the case of ordinary insurance orthe fifth policy anniversary in the case of industrial insurance, the companywill pay, upon surrender of the policy within 30 days after any policyanniversary, a cash surrender value of such amount as may be hereinafterspecified.
(5) In the case ofpolicies which cause on a basis guaranteed in the policy unscheduled changes inbenefits or premiums, or which provide an option for changes in benefits orpremiums other than a change to a new policy, a statement of the mortalitytable, interest rate, and method used in calculating cash surrender values andthe paid‑up nonforfeiture benefits available under the policy. In thecase of all other policies, a statement of the mortality table and interestrate used in calculating the cash surrender values and the paid‑upnonforfeiture benefits available under the policy, together with a tableshowing the cash surrender value, if any, and paid‑up nonforfeiturebenefit, if any available under the policy on each policy anniversary eitherduring the first 20 policy years or during the term of the policy, whichever isshorter, such values and benefits to be calculated upon the assumption thatthere are no dividends or paid‑up additions credited to the policy andthat there is no indebtedness to the company on the policy.
(6) A statement that thecash surrender values and the paid‑up nonforfeiture benefits availableunder the policy are not less than the minimum values and benefits required byor pursuant to the insurance law of the state in which the policy is delivered;an explanation of the manner in which the cash surrender values and the paid‑upnonforfeiture benefits are altered by the existence of any paid‑upadditions credited to the policy or any indebtedness to the company on thepolicy; if a detailed statement of the method of computation of the values andbenefits shown in the policy is not stated therein, a statement that suchmethod of computation has been filed with the Commissioner in which the policyis delivered; and a statement of the method to be used in calculating the cashsurrender value and paid‑up nonforfeiture benefit available under thepolicy on any policy anniversary beyond the last anniversary for which suchvalues and benefits are consecutively shown in the policy.
Any of the foregoingprovisions or portions thereof not applicable by reason of the plan ofinsurance may, to the extent inapplicable, be omitted from the policy.
The company shall reserve theright to defer the payment of any cash surrender value for a period of sixmonths after demand therefor with surrender of the policy.
(c) Any cash surrendervalue available under the policy in the event of default in a premium paymentdue on any policy anniversary, whether or not required by subsection (b), shallbe an amount not less than the excess, if any, of the present value, on suchanniversary, of the future guaranteed benefits which would have been providedfor by the policy, including any existing paid‑up additions, if there hadbeen no default, over the sum of (i) the then present value of the adjustedpremiums as defined in subsection (e), corresponding to premiums which wouldhave fallen due on and after such anniversary, and (ii) the amount of anyindebtedness to the company on the policy.
Provided, however, that forany policy issued on or after the operative date of subdivision (4) ofsubsection (e) as defined therein, which provides supplemental life insuranceor annuity benefits at the option of the insured and for an identifiableadditional premium by rider or supplemental policy provision, the cashsurrender value referred to in the first paragraph of this subsection shall bean amount not less than the sum of the cash surrender value as defined in suchparagraph for an otherwise similar policy issued at the same age without suchrider or supplemental policy provision and the cash surrender value as definedin such paragraph for a policy which provides only the benefits otherwiseprovided by such rider or supplemental policy provision.
Provided, further, that forany family policy issued on or after the operative date of subdivision (4) ofsubsection (e) as defined therein, which defines a primary insured and providesterm insurance on the life of the spouse of the primary insured expiring beforethe spouse's age 71, the cash surrender value referred to in the first paragraphof this subsection shall be an amount not less than the sum of the cashsurrender value as defined in such paragraph for an otherwise similar policyissued at the same age without such term insurance on the life of the spouseand cash surrender value as defined in such paragraph for a policy whichprovides only the benefits otherwise provided by such term insurance on thelife of the spouse.
Any cash surrender valueavailable within 30 days after any policy anniversary under any policy paid upby completion of all premium payments or any policy continued under any paid‑upnonforfeiture benefit, whether or not required by subsection (b), shall be anamount not less than the present value, on such anniversary, of the futureguaranteed benefits provided for by the policy, including any existing paid‑upadditions, decreased by any indebtedness to the company on the policy.
(d) Any paid‑upnonforfeiture benefit available under the policy in the event of default in apremium payment due on any policy anniversary shall be such that its presentvalue as of such anniversary shall be at least equal to the cash surrendervalue then provided for by the policy or, if none is provided for, at leastequal to that cash surrender value which would have been required by thissection in the absence of the condition that premiums shall have been paid forat least a specified period.
(e) (1) Thissubdivision (1) of subsection (e) shall not apply to policies issued on orafter the operative date of subdivision (4) of subsection (e) as definedtherein. Except as provided in the third paragraph of this subdivision, theadjusted premiums for any policy shall be calculated on an annual basis andshall be such uniform percentage of the respective premiums specified in thepolicy for each policy year, excluding any extra premiums charged because ofimpairments or special hazards, that the present value, at the date of issue ofthe policy, of all such adjusted premiums shall be equal to the sum of (i) thethen present value of the future guaranteed benefits provided for by thepolicy; (ii) two percent (2%) of the amount of insurance, if the insurance beuniform in amount, or of the equivalent uniform amount, as hereinafter defined,if the amount of insurance varies with duration of the policy; (iii) fortypercent (40%) of the adjusted premium for the first policy year; (iv) twenty‑fivepercent (25%) of either the adjusted premium for the first policy year or theadjusted premium for a whole life policy of the same uniform or equivalentuniform amount with uniform premiums for the whole of life issued at the sameage for the same amount of insurance, whichever is less. Provided, however,that in applying the percentages specified in (iii) and (iv) above, no adjustedpremium shall be deemed to exceed four percent (4%) of the amount of insuranceor uniform amount equivalent thereto. The date of issue of a policy for thepurpose of this subsection shall be the date as of which the rated age of theinsured is determined.
In the caseof a policy providing an amount of insurance varying with duration of thepolicy, the equivalent uniform amount thereof for the purpose of this sectionshall be deemed to be the uniform amount of insurance provided by an otherwisesimilar 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 varywith duration and the benefits under which have the same present value at thedate of issue as the benefits under the policy, provided, however, that in thecase of a policy providing a varying amount of insurance issued on the life ofa child under age 10, the equivalent uniform amount may be computed as thoughthe amount of insurance provided by the policy prior to the attainment of age10 were the amount provided by such policy at age 10.
The adjustedpremiums for any policy providing term insurance benefits by rider orsupplemental policy provision shall be equal to (i) the adjusted premiums foran otherwise similar policy issued at the same age without such term insurancebenefits, increased, during the period for which premiums for such terminsurance benefits are payable, by (ii) the adjusted premiums for such terminsurance, the foregoing items (i) and (ii) being calculated separately and asspecified in the first two paragraphs of this subsection except that, for thepurposes of (ii), (iii) and (iv) of the first such paragraph, the amount ofinsurance or equivalent uniform amount of insurance used in the calculation ofthe adjusted premiums referred to in (ii) of this paragraph shall be equal tothe excess of the corresponding amount determined for the entire policy overthe amount used in the calculation of the adjusted premiums in (i).
Except asotherwise provided in subdivisions (2) and (3) of this subsection, all adjustedpremiums and present values referred to in this section shall for all policiesof ordinary insurance be calculated on the basis of the Commissioner's 1941Standard Ordinary Mortality Table, provided that for any category of ordinaryinsurance issued on female risks, adjusted premiums and present values may becalculated according to an age not more than three years younger than theactual age of the insured, and such calculations for all policies of industrialinsurance shall be made on the basis of the 1941 Standard Industrial MortalityTable. All calculations shall be made on the basis of the rate of interest, notexceeding three and one‑half percent (3 1/2%) per annum, specified in thepolicy for calculating cash surrender values and paid‑up nonforfeiturebenefits. Provided, however, that in calculating the present value of any paid‑upterm insurance with accompanying pure endowment, if any, offered as anonforfeiture benefit, the rates of mortality assumed may not be more than onehundred and thirty percent (130%) of the rates of mortality according to suchapplicable table. Provided, further, that for insurance issued on a substandardbasis, the calculation of any such adjusted premiums and present values may bebased on such other table of mortality as may be specified by the company andapproved by the Commissioner.
(2) This subdivision (2)of subsection (e) shall not apply to ordinary policies issued on or after theoperative date of subdivision (4) of subsection (e) as defined therein. In thecase of ordinary policies issued on or after the operative date of thissubdivision (2) as defined herein, all adjusted premiums and present valuesreferred to in this section shall be calculated on the basis of theCommissioner's 1958 Standard Ordinary Mortality Table and the rate of interestspecified in the policy for calculating cash surrender values and paid‑upnonforfeiture benefits, provided that such rate of interest shall not exceedthree and one‑half percent (3 1/2%) per annum except that a rate ofinterest not exceeding four percent (4%) per annum may be used for policiesissued on or after July 1, 1975, and prior to April 19, 1979, and a rate ofinterest not exceeding five and one‑half percent (5 1/2%) per annum maybe used for policies issued on or after April 19, 1979, and, provided that forany category of ordinary insurance issued on female risks, adjusted premiumsand present values may be calculated according to an age not more than sixyears younger than the actual age of the insured; provided, however, that incalculating the present value of any paid‑up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, therates of mortality assumed may be not more than those shown in theCommissioner's 1958 Extended Term Insurance Table. Provided, further, that forinsurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on such other table of mortality asmay be specified by the company and approved by the Commissioner.
After May 12,1959, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this subdivision (2) after aspecified date before January 1, 1966. After the filing of such notice, thenupon such specified date (which shall be the operative date of this subdivision(2) for such company), this subdivision (2) shall become operative with respectto the ordinary policies thereafter issued by such company. If a company makesno such election, the operative date of this subdivision (2) for such companyshall be January 1, 1966.
(3) This subdivision (3)of subsection (e) shall not apply to industrial policies issued on or after theoperative date of subdivision (4) of subsection (e) as defined therein. In thecase of industrial policies issued on or after the operative date of thissubdivision (3) as defined herein, all adjusted premiums and present valuesreferred to in this section shall be calculated on the basis of theCommissioner's 1961 Standard Industrial Mortality Table and the rate ofinterest specified in the policy for calculating cash surrender values and paid‑upnonforfeiture benefits, provided that such rate of interest shall not exceedthree and one‑half percent (3 1/2%) per annum except that a rate ofinterest not exceeding four percent (4%) per annum may be used for policiesissued on or after July 1, 1975, and prior to April 19, 1979, and a rate ofinterest not exceeding five and one‑half percent (5 1/2%) per annum maybe used for policies issued on or after April 19, 1979; provided, however, thatin calculating the present value of any paid‑up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, the ratesof mortality assumed may be not more than those shown in the Commissioner's1961 Industrial Extended Term Insurance Table. Provided, further, that forinsurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on such other table of mortality asmay be specified by the company and approved by the Commissioner.
After June11, 1963, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this subdivision (3) after aspecified date before January 1, 1968. After the filing of such notice, thenupon such specified date (which shall be the operative date of this subdivision(3) for such company), this subdivision (3) shall become operative with respectto the industrial policies thereafter issued by such company. If a companymakes no such election, the operative date of this subdivision (3) for suchcompany shall be January 1, 1968.
(4) a. Thissubdivision shall apply to all policies issued on or after the operative dateof this subdivision (4) of subsection (e) as defined herein. Except as providedin paragraph g of this subdivision, the adjusted premiums for any policy shallbe calculated on an annual basis and shall be such uniform percentage of therespective premiums specified in the policy for each policy year, excludingamounts payable as extra premiums to cover impairments or special hazards andalso excluding any uniform annual contract charge or policy fee specified inthe policy in a statement of the method to be used in calculating the cashsurrender values and paid‑up nonforfeiture benefits, that the presentvalue, at the date of issue of the policy, of all adjusted premiums shall beequal to the sum of (i) the then present value of the future guaranteedbenefits provided for by the policy; (ii) one percent (1%) of either the amountof insurance, if the insurance be uniform in amount, or the average amount ofinsurance at the beginning of each of the first 10 policy years; and (iii) onehundred twenty‑five percent (125%) of the nonforfeiture net level premiumas hereinafter defined. Provided, however, that in applying the percentagespecified in (iii) above no nonforfeiture net level premium shall be deemed toexceed four percent (4%) of either the amount of insurance, if the insurance beuniform in amount, or the average amount of insurance at the beginning of eachof the first 10 policy years. The date of issue of a policy for the purpose ofthis subdivision shall be the date as of which the rated age of the insured isdetermined.
b. The nonforfeiturenet level premium shall be equal to the present value, at the date of issue ofthe policy, of the guaranteed benefits provided for by the policy divided bythe present value, at the date of issue of the policy, of an annuity of one perannum payable on the date of issue of the policy and on each anniversary ofsuch policy on which a premium falls due.
c. In the case ofpolicies which cause on a basis guaranteed in the policy unscheduled changes inbenefits or premiums, or which provide an option for changes in benefits orpremiums other than a change to a new policy, the adjusted premiums and presentvalues shall initially be calculated on the assumption that future benefits andpremiums do not change from those stipulated at the date of issue of thepolicy. At the time of any such change in the benefits or premiums the futureadjusted premiums, nonforfeiture net level premiums and present values shall berecalculated on the assumption that future benefits and premiums do not changefrom those stipulated by the policy immediately after the change.
d. Except as otherwiseprovided in paragraph g of this subdivision, the recalculated future adjustedpremiums for any such policy shall be such uniform percentage of the respectivefuture premiums specified in the policy for each policy year, excluding amountspayable as extra premiums to cover impairments and special hazards, and alsoexcluding any uniform annual contract charge or policy fee specified in thepolicy in a statement of the method to be used in calculating the cashsurrender values and paid‑up nonforfeiture benefits, that the presentvalue, at the time of change to the newly defined benefits or premiums, of allsuch future adjusted premiums shall be equal to the excess of (A) the sum of(i) the then present value of the then future guaranteed benefits provided forby the policy and (ii) the additional expense allowance, if any, over (B) thethen cash surrender value, if any, or present value of any paid‑upnonforfeiture benefit under the policy.
e. The additionalexpense allowance, at the time of the change to the newly defined benefits orpremiums, shall be the sum of (i) one percent (1%) of the excess, if positive,of the average amount of insurance at the beginning of each of the first 10policy years subsequent to the change over the average amount of insuranceprior to the change at the beginning of each of the first 10 policy yearssubsequent to the time of the most recent previous change, or, if there hasbeen no previous change, the date of issue of the policy; and (ii) one hundredtwenty‑five percent (125%) of the increase, if positive, in thenonforfeiture net level premium.
f. The recalculatednonforfeiture net level premium shall be equal to the result obtained bydividing (A) by (B) where
(A) Equals the sum of
(i) The nonforfeiturenet level premium applicable prior to the change times the present value of anannuity of one per annum payable on each anniversary of the policy on orsubsequent to the date of the change on which a premium would have fallen duehad the change not occurred, and
(ii) The present valueof the increase in future guaranteed benefits provided for by the policy, and
(B) Equals the presentvalue of an annuity of one per annum payable on each anniversary of the policyon or subsequent to the date of change on which a premium falls due.
g. Notwithstanding anyother provisions of this subdivision to the contrary, in the case of a policyissued on a substandard basis which provides reduced graded amounts ofinsurance so that, in each policy year, such policy has the same tabularmortality cost as an otherwise similar policy issued on the standard basiswhich provides higher uniform amounts of insurance, adjusted premiums andpresent values for such substandard policy may be calculated as if it wereissued to provide such higher uniform amounts of insurance on the standardbasis.
h. All adjustedpremiums and present values referred to in this section shall for all policiesof ordinary insurance be calculated on the basis of (i) the Commissioner's 1980Standard Ordinary Mortality Table or (ii) at the election of the company forany one or more specified plans of life insurance, the Commissioner's 1980Standard Ordinary Mortality Table with Ten‑Year Select Mortality Factors;shall for all policies of industrial insurance be calculated on the basis ofthe Commissioner's 1961 Standard Industrial Mortality Table; and shall for allpolicies issued in a particular calendar year be calculated on the basis of arate of interest not exceeding the nonforfeiture interest rate as defined inthis subdivision for policies issued in that calendar year. Provided, however,that:
1. At the option of thecompany, calculations for all policies issued in a particular calendar year maybe made on the basis of a rate of interest not exceeding the nonforfeitureinterest rate, as defined in this subdivision, for policies issued in theimmediately preceding calendar year.
2. Under any paid‑upnonforfeiture benefit, including any paid‑up dividend additions, any cashsurrender value available, whether or not required by subsection (b), shall becalculated on the basis of the mortality table and rate of interest used indetermining the amount of such paid‑up nonforfeiture benefit and paid‑updividend additions, if any.
3. A company maycalculate the amount of any guaranteed paid‑up nonforfeiture benefitincluding any paid‑up additions under the policy on the basis of aninterest rate no lower than that specified in the policy for calculating cashsurrender values.
4. In calculating thepresent value of any paid‑up term insurance with accompanying pureendowment, if any, offered as a nonforfeiture benefit, the rates of mortalityassumed may be not more than those shown in the Commissioner's 1980 ExtendedTerm Insurance Table for policies of ordinary insurance and not more than theCommissioner's 1961 Industrial Extended Term Insurance Table for policies ofindustrial insurance.
5. For insurance issuedon a substandard basis, the calculation of any such adjusted premiums andpresent values may be based on appropriate modifications of the aforementionedtables.
6. Any ordinarymortality tables, adopted after 1980 by the NAIC, that are approved byregulation promulgated by the Commissioner for use in determining the minimumnonforfeiture standard may be substituted for the Commissioner's 1980 StandardOrdinary Mortality Table with or without Ten‑Year Select MortalityFactors or for the Commissioner's 1980 Extended Term Insurance Table.
7. Any industrialmortality tables, adopted after 1980 by the NAIC, that are approved byregulation promulgated by the Commissioner for use in determining the minimumnonforfeiture standard may be substituted for the Commissioner's 1961 StandardIndustrial Mortality Table or the Commissioner's 1961 Industrial Extended TermInsurance Table.
i. The nonforfeitureinterest rate per annum for any policy issued in a particular calendar yearshall be equal to one hundred and twenty‑five percent (125%) of thecalendar year statutory valuation interest rate for such policy as defined inthe Standard Valuation Law, rounded to the nearer one quarter of one percent(1/4 of 1%).
j. Notwithstanding anyother provision in this Chapter to the contrary, any refiling of nonforfeiturevalues or their methods of computation for any previously approved policy formwhich involves only a change in the interest rate or mortality table used tocompute nonforfeiture values shall not require refiling of any other provisionsof that policy form.
k. After the effectivedate of this subdivision (4) of subsection (e), any company may file with theCommissioner a written notice of its election to comply with the provisions ofthis subdivision after a specified date before January 1, 1989, which shall bethe operative date of this subdivision for such company. If a company makes nosuch election, the operative date of this subdivision for such company shall beJanuary 1, 1989.
(e1) In the case of anyplan of life insurance which provides for future premium determination, theamounts of which are to be determined by the insurance company based on thenestimates of future experience, or in the case of any plan of life insurancewhich is of such a nature that minimum values cannot be determined by themethods described in subsections (b), (c), (d), or (e) herein, then:
(1) The Commissionermust be satisfied that the benefits provided under the plan are substantiallyas favorable to policyholders and insureds as the minimum benefits otherwiserequired by subsections (b), (c), (d), or (e) herein;
(2) The Commissionermust be satisfied that the benefits and the pattern of premiums of that planare not such as to mislead prospective policyholders or insureds;
(3) The cash surrendervalues and paid‑up nonforfeiture benefits provided by such plan must notbe less than the minimum values and benefits required for the plan computed bya method consistent with the principles of this Standard Nonforfeiture Law, asdetermined by regulations promulgated by the Commissioner;
(4) Notwithstanding anyother provision in the laws of this State, any policy, contract, or certificateproviding life insurance under any such plan must be affirmatively approved bythe Commissioner before it can be marketed, issued, delivered, or used in thisState.
(f) Any cash surrendervalue and any paid‑up nonforfeiture benefit, available under the policyin the event of default in a premium payment due at any time other than on thepolicy anniversary, shall be calculated with allowance for the lapse of timeand the payment of fractional premiums beyond the last preceding policyanniversary. Any values referred to in subsections (c), (d) and (e) may becalculated upon the assumption that any death benefit is payable at the end ofthe policy year of death. The net value of any paid‑up additions, otherthan paid‑up term additions, shall be not less than the amounts used toprovide such additions. Notwithstanding the provisions of Section 3 [subsection(c)], additional benefits payable (i) in the event of death or dismemberment byaccident or accidental means, (ii) in the event of total and permanentdisability, (iii) as reversionary annuity or deferred reversionary annuitybenefits, (iv) as term insurance benefits provided by a rider or supplementalpolicy provision to which, if issued as a separate policy, this section wouldnot apply, (v) as term insurance on the life of a child or on the lives ofchildren provided in a policy on the life of a parent of the child, if suchterm insurance expires before the child's age is 26, is uniform in amount afterthe child's age is one, and has not become paid up by reason of the death of aparent of the child, and (vi) as other policy benefits additional to lifeinsurance and endowment benefits, and premiums for all such additionalbenefits, shall be disregarded in ascertaining cash surrender values andnonforfeiture benefits required by this section, and no such additionalbenefits shall be required to be included in any paid‑up nonforfeiturebenefits.
(f1) This subsection, inaddition to all other applicable subsections of this section, shall apply toall policies issued on or after January 1, 1985. Any cash surrender valueavailable under the policy in the event of default in a premium payment due onany policy anniversary shall be in an amount which does not differ by more thantwo‑tenths of one percent (2/10 of 1%) of either the amount of insurance,if the insurance be uniform in amount, or the average amount of insurance at thebeginning of each of the first 10 policy years, from the sum of (1) the greaterof zero and the basic cash value hereinafter specified and (2) the presentvalue of any existing paid‑up additions less the amount of anyindebtedness to the company under the policy.
The basic cash value shall beequal to the present value, on such anniversary, of the future guaranteedbenefits which would have been provided for by the policy, excluding anyexisting paid‑up additions and before deduction of any indebtedness tothe company, if there had been no default, less the then present value of thenonforfeiture factors, as hereinafter defined, corresponding to premiums whichwould have fallen due on and after such anniversary. Provided, however, thatthe effects on the basic cash value of supplemental life insurance or annuitybenefits or of family coverage, as described in subsection (c) or (e)(1),whichever is applicable, shall be the same as are the effects specified insubsection (c) or (e)(1), whichever is applicable, on the cash surrender valuesdefined in that subsection.
The nonforfeiture factor foreach policy year shall be an amount equal to a percentage of the adjustedpremium for the policy year, as defined in subsection (e)(1) or (e)(4),whichever is applicable. Except as is required by the next succeeding sentenceof this paragraph, such percentage:
(1) Must be the samepercentage for each policy year between the second policy anniversary and thelater of (i) the fifth policy anniversary and (ii) the first policy anniversaryat which there is available under the policy a cash surrender value in anamount, before including any paid‑up additions and before deducting anyindebtedness, of at least two‑tenths of one percent (2/10 of 1%) ofeither the amount of insurance, if the insurance be uniform in amount, or theaverage amount of insurance at the beginning of each of the first 10 policyyears; and
(2) Must be such that nopercentage after the later of the two policy anniversaries specified in thepreceding item (1) may apply to fewer than five consecutive policy years.
Provided, that no basic cashvalue may be less than the value which would be obtained if the adjustedpremiums for the policy, as defined in subsection (e)(1) or (e)(4), whicheveris applicable, were substituted for the nonforfeiture factors in thecalculation of the basic cash value.
All adjusted premiums andpresent values referred to in this subsection shall for a particular policy becalculated on the same mortality and interest bases as are used indemonstrating the policy's compliance with the other subsections of thissection. The cash surrender values referred to in this subsection shall includeany endowment benefits provided for by the policy.
Any cash surrender valueavailable other than in the event of default in a premium payment due on apolicy anniversary, and the amount of any paid‑up nonforfeiture benefitavailable under the policy in the event of default in a premium payment shallbe determined in manners consistent with the manners specified for determiningthe analogous minimum amounts in subsections (b), (c), (d), (e)(4), and (f).The amounts of any cash surrender values and of any paid‑up nonforfeiturebenefits granted in connection with additional benefits such as those listed asitems (i) through (vi) in subsection (f) shall conform with the principles ofthis subsection (f1).
(g) The provisions ofthis section shall not apply to any of the following:
(1) Industrial sickbenefit insurance as defined in Articles 1 through 64 of this Chapter,
(2) Reinsurance,
(3) Group insurance,
(4) Pure endowment,
(5) Annuity orreversionary annuity contract,
(6) Term policy ofuniform amount, which provides no guaranteed nonforfeiture or endowmentbenefits, or renewal thereof, of 20 years or less, for which uniform premiumsare payable during the entire term of the policy,
(7) Term policy ofdecreasing amount, which provides no guaranteed nonforfeiture or endowmentbenefits, on which each adjusted premium, calculated as specified in subsection(e), is less than the adjusted premium so calculated, on a term policy ofuniform amount, or renewal thereof, which provides no guaranteed nonforfeitureor endowment benefits, issued at the same age and for the same initial amountof insurance and for a term of 20 years or less expiring before age 71, forwhich uniform premiums are payable during the entire term of the policy,
(8) Policy, whichprovides no guaranteed nonforfeiture or endowment benefits, for which no cashsurrender value, if any, or present value of any paid‑up nonforfeiturebenefit, at the beginning of any policy year, calculated as specified insubsections (c), (d) and (e), exceeds two and one‑half percent (2 1/2%)of the amount of insurance at the beginning of the same policy year, nor
(9) Policy which shallbe delivered outside this State through an agent or other representative of thecompany issuing the policy.
For purposes of determining theapplicability of this section, the age at expiry for a joint term lifeinsurance policy shall be the age at expiry of the oldest life.
(h) After March 6,1945, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this section after a specified datebefore January 1, 1950. After the filing of such notice then upon suchspecified date (which shall be the operative date for such company) thissection shall become operative with respect to the policies thereafter issuedby such company. If a company makes no such election, the operative date ofthis section for such company shall be January 1, 1950.
(i) For any singlepremium whole life or endowment insurance policy subject to subdivisions (e)(2)and (e)(3) of this section, a rate of interest not exceeding six and one‑halfpercent (6 1/2%) per annum may be used. (1945, c. 379; 1959, c. 484,s. 2; 1961, c. 255, ss. 4‑7; 1963, c. 791, ss. 3, 4; 1975, c. 603, ss. 2,3; 1979, c. 409, ss. 7‑9; 1981, c. 761, ss. 6‑14; 1991, c. 720, ss.19, 31; 1993, c. 452, ss. 57‑59.)
(a) This section shallbe known as the Standard Nonforfeiture Law for Life Insurance.
(b) In the case ofpolicies issued on or after the operative date of this section, as defined insubsection (h), no policy of life insurance, except as stated in subsection(g), shall be delivered or issued for delivery in this State unless it shallcontain in substance the following provisions, or corresponding provisionswhich in the opinion of the Commissioner are at least as favorable to thedefaulting or surrendering policyholder as are the minimum requirementshereinafter specified and are essentially in compliance with subsection (f1) ofthis section:
(1) That, in the eventof default in any premium payment after premiums have been paid for at leastone full year in the case of ordinary insurance or three full years in the caseof industrial insurance, the company will grant, upon proper request not laterthan 60 days after the due date of the premium in default, a paid‑upnonforfeiture benefit on a plan stipulated in the policy, effective as of suchdue date, of such amount as may be hereinafter specified. In lieu of suchstipulated paid‑up nonforfeiture benefit, the company may substitute,upon proper request not later than 60 days after the due date of the premium indefault, an actuarially equivalent alternative paid‑up nonforfeiturebenefit which provides a greater amount or longer period of death benefits or,if applicable, a greater amount or earlier payment of endowment benefits.
(2) That, upon surrenderof the policy within 60 days after the due date of any premium payment indefault after premiums have been paid for at least three full years in the caseof ordinary insurance or five full years in the case of industrial insurance,the company will pay, in lieu of any paid‑up nonforfeiture benefit, acash surrender value of such amount as may be hereinafter specified.
(3) That a specifiedpaid‑up nonforfeiture benefit shall become effective as specified in thepolicy unless the person entitled to make such election elects anotheravailable option not later than 60 days after the due date of the premium indefault. Nothing herein shall prevent the use of an automatic premium loanprovision.
(4) That, if the policyshall have become paid up by completion of all premium payments or if it iscontinued under any paid‑up nonforfeiture benefit which became effectiveon or after the third policy anniversary in the case of ordinary insurance orthe fifth policy anniversary in the case of industrial insurance, the companywill pay, upon surrender of the policy within 30 days after any policyanniversary, a cash surrender value of such amount as may be hereinafterspecified.
(5) In the case ofpolicies which cause on a basis guaranteed in the policy unscheduled changes inbenefits or premiums, or which provide an option for changes in benefits orpremiums other than a change to a new policy, a statement of the mortalitytable, interest rate, and method used in calculating cash surrender values andthe paid‑up nonforfeiture benefits available under the policy. In thecase of all other policies, a statement of the mortality table and interestrate used in calculating the cash surrender values and the paid‑upnonforfeiture benefits available under the policy, together with a tableshowing the cash surrender value, if any, and paid‑up nonforfeiturebenefit, if any available under the policy on each policy anniversary eitherduring the first 20 policy years or during the term of the policy, whichever isshorter, such values and benefits to be calculated upon the assumption thatthere are no dividends or paid‑up additions credited to the policy andthat there is no indebtedness to the company on the policy.
(6) A statement that thecash surrender values and the paid‑up nonforfeiture benefits availableunder the policy are not less than the minimum values and benefits required byor pursuant to the insurance law of the state in which the policy is delivered;an explanation of the manner in which the cash surrender values and the paid‑upnonforfeiture benefits are altered by the existence of any paid‑upadditions credited to the policy or any indebtedness to the company on thepolicy; if a detailed statement of the method of computation of the values andbenefits shown in the policy is not stated therein, a statement that suchmethod of computation has been filed with the Commissioner in which the policyis delivered; and a statement of the method to be used in calculating the cashsurrender value and paid‑up nonforfeiture benefit available under thepolicy on any policy anniversary beyond the last anniversary for which suchvalues and benefits are consecutively shown in the policy.
Any of the foregoingprovisions or portions thereof not applicable by reason of the plan ofinsurance may, to the extent inapplicable, be omitted from the policy.
The company shall reserve theright to defer the payment of any cash surrender value for a period of sixmonths after demand therefor with surrender of the policy.
(c) Any cash surrendervalue available under the policy in the event of default in a premium paymentdue on any policy anniversary, whether or not required by subsection (b), shallbe an amount not less than the excess, if any, of the present value, on suchanniversary, of the future guaranteed benefits which would have been providedfor by the policy, including any existing paid‑up additions, if there hadbeen no default, over the sum of (i) the then present value of the adjustedpremiums as defined in subsection (e), corresponding to premiums which wouldhave fallen due on and after such anniversary, and (ii) the amount of anyindebtedness to the company on the policy.
Provided, however, that forany policy issued on or after the operative date of subdivision (4) ofsubsection (e) as defined therein, which provides supplemental life insuranceor annuity benefits at the option of the insured and for an identifiableadditional premium by rider or supplemental policy provision, the cashsurrender value referred to in the first paragraph of this subsection shall bean amount not less than the sum of the cash surrender value as defined in suchparagraph for an otherwise similar policy issued at the same age without suchrider or supplemental policy provision and the cash surrender value as definedin such paragraph for a policy which provides only the benefits otherwiseprovided by such rider or supplemental policy provision.
Provided, further, that forany family policy issued on or after the operative date of subdivision (4) ofsubsection (e) as defined therein, which defines a primary insured and providesterm insurance on the life of the spouse of the primary insured expiring beforethe spouse's age 71, the cash surrender value referred to in the first paragraphof this subsection shall be an amount not less than the sum of the cashsurrender value as defined in such paragraph for an otherwise similar policyissued at the same age without such term insurance on the life of the spouseand cash surrender value as defined in such paragraph for a policy whichprovides only the benefits otherwise provided by such term insurance on thelife of the spouse.
Any cash surrender valueavailable within 30 days after any policy anniversary under any policy paid upby completion of all premium payments or any policy continued under any paid‑upnonforfeiture benefit, whether or not required by subsection (b), shall be anamount not less than the present value, on such anniversary, of the futureguaranteed benefits provided for by the policy, including any existing paid‑upadditions, decreased by any indebtedness to the company on the policy.
(d) Any paid‑upnonforfeiture benefit available under the policy in the event of default in apremium payment due on any policy anniversary shall be such that its presentvalue as of such anniversary shall be at least equal to the cash surrendervalue then provided for by the policy or, if none is provided for, at leastequal to that cash surrender value which would have been required by thissection in the absence of the condition that premiums shall have been paid forat least a specified period.
(e) (1) Thissubdivision (1) of subsection (e) shall not apply to policies issued on orafter the operative date of subdivision (4) of subsection (e) as definedtherein. Except as provided in the third paragraph of this subdivision, theadjusted premiums for any policy shall be calculated on an annual basis andshall be such uniform percentage of the respective premiums specified in thepolicy for each policy year, excluding any extra premiums charged because ofimpairments or special hazards, that the present value, at the date of issue ofthe policy, of all such adjusted premiums shall be equal to the sum of (i) thethen present value of the future guaranteed benefits provided for by thepolicy; (ii) two percent (2%) of the amount of insurance, if the insurance beuniform in amount, or of the equivalent uniform amount, as hereinafter defined,if the amount of insurance varies with duration of the policy; (iii) fortypercent (40%) of the adjusted premium for the first policy year; (iv) twenty‑fivepercent (25%) of either the adjusted premium for the first policy year or theadjusted premium for a whole life policy of the same uniform or equivalentuniform amount with uniform premiums for the whole of life issued at the sameage for the same amount of insurance, whichever is less. Provided, however,that in applying the percentages specified in (iii) and (iv) above, no adjustedpremium shall be deemed to exceed four percent (4%) of the amount of insuranceor uniform amount equivalent thereto. The date of issue of a policy for thepurpose of this subsection shall be the date as of which the rated age of theinsured is determined.
In the caseof a policy providing an amount of insurance varying with duration of thepolicy, the equivalent uniform amount thereof for the purpose of this sectionshall be deemed to be the uniform amount of insurance provided by an otherwisesimilar 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 varywith duration and the benefits under which have the same present value at thedate of issue as the benefits under the policy, provided, however, that in thecase of a policy providing a varying amount of insurance issued on the life ofa child under age 10, the equivalent uniform amount may be computed as thoughthe amount of insurance provided by the policy prior to the attainment of age10 were the amount provided by such policy at age 10.
The adjustedpremiums for any policy providing term insurance benefits by rider orsupplemental policy provision shall be equal to (i) the adjusted premiums foran otherwise similar policy issued at the same age without such term insurancebenefits, increased, during the period for which premiums for such terminsurance benefits are payable, by (ii) the adjusted premiums for such terminsurance, the foregoing items (i) and (ii) being calculated separately and asspecified in the first two paragraphs of this subsection except that, for thepurposes of (ii), (iii) and (iv) of the first such paragraph, the amount ofinsurance or equivalent uniform amount of insurance used in the calculation ofthe adjusted premiums referred to in (ii) of this paragraph shall be equal tothe excess of the corresponding amount determined for the entire policy overthe amount used in the calculation of the adjusted premiums in (i).
Except asotherwise provided in subdivisions (2) and (3) of this subsection, all adjustedpremiums and present values referred to in this section shall for all policiesof ordinary insurance be calculated on the basis of the Commissioner's 1941Standard Ordinary Mortality Table, provided that for any category of ordinaryinsurance issued on female risks, adjusted premiums and present values may becalculated according to an age not more than three years younger than theactual age of the insured, and such calculations for all policies of industrialinsurance shall be made on the basis of the 1941 Standard Industrial MortalityTable. All calculations shall be made on the basis of the rate of interest, notexceeding three and one‑half percent (3 1/2%) per annum, specified in thepolicy for calculating cash surrender values and paid‑up nonforfeiturebenefits. Provided, however, that in calculating the present value of any paid‑upterm insurance with accompanying pure endowment, if any, offered as anonforfeiture benefit, the rates of mortality assumed may not be more than onehundred and thirty percent (130%) of the rates of mortality according to suchapplicable table. Provided, further, that for insurance issued on a substandardbasis, the calculation of any such adjusted premiums and present values may bebased on such other table of mortality as may be specified by the company andapproved by the Commissioner.
(2) This subdivision (2)of subsection (e) shall not apply to ordinary policies issued on or after theoperative date of subdivision (4) of subsection (e) as defined therein. In thecase of ordinary policies issued on or after the operative date of thissubdivision (2) as defined herein, all adjusted premiums and present valuesreferred to in this section shall be calculated on the basis of theCommissioner's 1958 Standard Ordinary Mortality Table and the rate of interestspecified in the policy for calculating cash surrender values and paid‑upnonforfeiture benefits, provided that such rate of interest shall not exceedthree and one‑half percent (3 1/2%) per annum except that a rate ofinterest not exceeding four percent (4%) per annum may be used for policiesissued on or after July 1, 1975, and prior to April 19, 1979, and a rate ofinterest not exceeding five and one‑half percent (5 1/2%) per annum maybe used for policies issued on or after April 19, 1979, and, provided that forany category of ordinary insurance issued on female risks, adjusted premiumsand present values may be calculated according to an age not more than sixyears younger than the actual age of the insured; provided, however, that incalculating the present value of any paid‑up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, therates of mortality assumed may be not more than those shown in theCommissioner's 1958 Extended Term Insurance Table. Provided, further, that forinsurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on such other table of mortality asmay be specified by the company and approved by the Commissioner.
After May 12,1959, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this subdivision (2) after aspecified date before January 1, 1966. After the filing of such notice, thenupon such specified date (which shall be the operative date of this subdivision(2) for such company), this subdivision (2) shall become operative with respectto the ordinary policies thereafter issued by such company. If a company makesno such election, the operative date of this subdivision (2) for such companyshall be January 1, 1966.
(3) This subdivision (3)of subsection (e) shall not apply to industrial policies issued on or after theoperative date of subdivision (4) of subsection (e) as defined therein. In thecase of industrial policies issued on or after the operative date of thissubdivision (3) as defined herein, all adjusted premiums and present valuesreferred to in this section shall be calculated on the basis of theCommissioner's 1961 Standard Industrial Mortality Table and the rate ofinterest specified in the policy for calculating cash surrender values and paid‑upnonforfeiture benefits, provided that such rate of interest shall not exceedthree and one‑half percent (3 1/2%) per annum except that a rate ofinterest not exceeding four percent (4%) per annum may be used for policiesissued on or after July 1, 1975, and prior to April 19, 1979, and a rate ofinterest not exceeding five and one‑half percent (5 1/2%) per annum maybe used for policies issued on or after April 19, 1979; provided, however, thatin calculating the present value of any paid‑up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, the ratesof mortality assumed may be not more than those shown in the Commissioner's1961 Industrial Extended Term Insurance Table. Provided, further, that forinsurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on such other table of mortality asmay be specified by the company and approved by the Commissioner.
After June11, 1963, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this subdivision (3) after aspecified date before January 1, 1968. After the filing of such notice, thenupon such specified date (which shall be the operative date of this subdivision(3) for such company), this subdivision (3) shall become operative with respectto the industrial policies thereafter issued by such company. If a companymakes no such election, the operative date of this subdivision (3) for suchcompany shall be January 1, 1968.
(4) a. Thissubdivision shall apply to all policies issued on or after the operative dateof this subdivision (4) of subsection (e) as defined herein. Except as providedin paragraph g of this subdivision, the adjusted premiums for any policy shallbe calculated on an annual basis and shall be such uniform percentage of therespective premiums specified in the policy for each policy year, excludingamounts payable as extra premiums to cover impairments or special hazards andalso excluding any uniform annual contract charge or policy fee specified inthe policy in a statement of the method to be used in calculating the cashsurrender values and paid‑up nonforfeiture benefits, that the presentvalue, at the date of issue of the policy, of all adjusted premiums shall beequal to the sum of (i) the then present value of the future guaranteedbenefits provided for by the policy; (ii) one percent (1%) of either the amountof insurance, if the insurance be uniform in amount, or the average amount ofinsurance at the beginning of each of the first 10 policy years; and (iii) onehundred twenty‑five percent (125%) of the nonforfeiture net level premiumas hereinafter defined. Provided, however, that in applying the percentagespecified in (iii) above no nonforfeiture net level premium shall be deemed toexceed four percent (4%) of either the amount of insurance, if the insurance beuniform in amount, or the average amount of insurance at the beginning of eachof the first 10 policy years. The date of issue of a policy for the purpose ofthis subdivision shall be the date as of which the rated age of the insured isdetermined.
b. The nonforfeiturenet level premium shall be equal to the present value, at the date of issue ofthe policy, of the guaranteed benefits provided for by the policy divided bythe present value, at the date of issue of the policy, of an annuity of one perannum payable on the date of issue of the policy and on each anniversary ofsuch policy on which a premium falls due.
c. In the case ofpolicies which cause on a basis guaranteed in the policy unscheduled changes inbenefits or premiums, or which provide an option for changes in benefits orpremiums other than a change to a new policy, the adjusted premiums and presentvalues shall initially be calculated on the assumption that future benefits andpremiums do not change from those stipulated at the date of issue of thepolicy. At the time of any such change in the benefits or premiums the futureadjusted premiums, nonforfeiture net level premiums and present values shall berecalculated on the assumption that future benefits and premiums do not changefrom those stipulated by the policy immediately after the change.
d. Except as otherwiseprovided in paragraph g of this subdivision, the recalculated future adjustedpremiums for any such policy shall be such uniform percentage of the respectivefuture premiums specified in the policy for each policy year, excluding amountspayable as extra premiums to cover impairments and special hazards, and alsoexcluding any uniform annual contract charge or policy fee specified in thepolicy in a statement of the method to be used in calculating the cashsurrender values and paid‑up nonforfeiture benefits, that the presentvalue, at the time of change to the newly defined benefits or premiums, of allsuch future adjusted premiums shall be equal to the excess of (A) the sum of(i) the then present value of the then future guaranteed benefits provided forby the policy and (ii) the additional expense allowance, if any, over (B) thethen cash surrender value, if any, or present value of any paid‑upnonforfeiture benefit under the policy.
e. The additionalexpense allowance, at the time of the change to the newly defined benefits orpremiums, shall be the sum of (i) one percent (1%) of the excess, if positive,of the average amount of insurance at the beginning of each of the first 10policy years subsequent to the change over the average amount of insuranceprior to the change at the beginning of each of the first 10 policy yearssubsequent to the time of the most recent previous change, or, if there hasbeen no previous change, the date of issue of the policy; and (ii) one hundredtwenty‑five percent (125%) of the increase, if positive, in thenonforfeiture net level premium.
f. The recalculatednonforfeiture net level premium shall be equal to the result obtained bydividing (A) by (B) where
(A) Equals the sum of
(i) The nonforfeiturenet level premium applicable prior to the change times the present value of anannuity of one per annum payable on each anniversary of the policy on orsubsequent to the date of the change on which a premium would have fallen duehad the change not occurred, and
(ii) The present valueof the increase in future guaranteed benefits provided for by the policy, and
(B) Equals the presentvalue of an annuity of one per annum payable on each anniversary of the policyon or subsequent to the date of change on which a premium falls due.
g. Notwithstanding anyother provisions of this subdivision to the contrary, in the case of a policyissued on a substandard basis which provides reduced graded amounts ofinsurance so that, in each policy year, such policy has the same tabularmortality cost as an otherwise similar policy issued on the standard basiswhich provides higher uniform amounts of insurance, adjusted premiums andpresent values for such substandard policy may be calculated as if it wereissued to provide such higher uniform amounts of insurance on the standardbasis.
h. All adjustedpremiums and present values referred to in this section shall for all policiesof ordinary insurance be calculated on the basis of (i) the Commissioner's 1980Standard Ordinary Mortality Table or (ii) at the election of the company forany one or more specified plans of life insurance, the Commissioner's 1980Standard Ordinary Mortality Table with Ten‑Year Select Mortality Factors;shall for all policies of industrial insurance be calculated on the basis ofthe Commissioner's 1961 Standard Industrial Mortality Table; and shall for allpolicies issued in a particular calendar year be calculated on the basis of arate of interest not exceeding the nonforfeiture interest rate as defined inthis subdivision for policies issued in that calendar year. Provided, however,that:
1. At the option of thecompany, calculations for all policies issued in a particular calendar year maybe made on the basis of a rate of interest not exceeding the nonforfeitureinterest rate, as defined in this subdivision, for policies issued in theimmediately preceding calendar year.
2. Under any paid‑upnonforfeiture benefit, including any paid‑up dividend additions, any cashsurrender value available, whether or not required by subsection (b), shall becalculated on the basis of the mortality table and rate of interest used indetermining the amount of such paid‑up nonforfeiture benefit and paid‑updividend additions, if any.
3. A company maycalculate the amount of any guaranteed paid‑up nonforfeiture benefitincluding any paid‑up additions under the policy on the basis of aninterest rate no lower than that specified in the policy for calculating cashsurrender values.
4. In calculating thepresent value of any paid‑up term insurance with accompanying pureendowment, if any, offered as a nonforfeiture benefit, the rates of mortalityassumed may be not more than those shown in the Commissioner's 1980 ExtendedTerm Insurance Table for policies of ordinary insurance and not more than theCommissioner's 1961 Industrial Extended Term Insurance Table for policies ofindustrial insurance.
5. For insurance issuedon a substandard basis, the calculation of any such adjusted premiums andpresent values may be based on appropriate modifications of the aforementionedtables.
6. Any ordinarymortality tables, adopted after 1980 by the NAIC, that are approved byregulation promulgated by the Commissioner for use in determining the minimumnonforfeiture standard may be substituted for the Commissioner's 1980 StandardOrdinary Mortality Table with or without Ten‑Year Select MortalityFactors or for the Commissioner's 1980 Extended Term Insurance Table.
7. Any industrialmortality tables, adopted after 1980 by the NAIC, that are approved byregulation promulgated by the Commissioner for use in determining the minimumnonforfeiture standard may be substituted for the Commissioner's 1961 StandardIndustrial Mortality Table or the Commissioner's 1961 Industrial Extended TermInsurance Table.
i. The nonforfeitureinterest rate per annum for any policy issued in a particular calendar yearshall be equal to one hundred and twenty‑five percent (125%) of thecalendar year statutory valuation interest rate for such policy as defined inthe Standard Valuation Law, rounded to the nearer one quarter of one percent(1/4 of 1%).
j. Notwithstanding anyother provision in this Chapter to the contrary, any refiling of nonforfeiturevalues or their methods of computation for any previously approved policy formwhich involves only a change in the interest rate or mortality table used tocompute nonforfeiture values shall not require refiling of any other provisionsof that policy form.
k. After the effectivedate of this subdivision (4) of subsection (e), any company may file with theCommissioner a written notice of its election to comply with the provisions ofthis subdivision after a specified date before January 1, 1989, which shall bethe operative date of this subdivision for such company. If a company makes nosuch election, the operative date of this subdivision for such company shall beJanuary 1, 1989.
(e1) In the case of anyplan of life insurance which provides for future premium determination, theamounts of which are to be determined by the insurance company based on thenestimates of future experience, or in the case of any plan of life insurancewhich is of such a nature that minimum values cannot be determined by themethods described in subsections (b), (c), (d), or (e) herein, then:
(1) The Commissionermust be satisfied that the benefits provided under the plan are substantiallyas favorable to policyholders and insureds as the minimum benefits otherwiserequired by subsections (b), (c), (d), or (e) herein;
(2) The Commissionermust be satisfied that the benefits and the pattern of premiums of that planare not such as to mislead prospective policyholders or insureds;
(3) The cash surrendervalues and paid‑up nonforfeiture benefits provided by such plan must notbe less than the minimum values and benefits required for the plan computed bya method consistent with the principles of this Standard Nonforfeiture Law, asdetermined by regulations promulgated by the Commissioner;
(4) Notwithstanding anyother provision in the laws of this State, any policy, contract, or certificateproviding life insurance under any such plan must be affirmatively approved bythe Commissioner before it can be marketed, issued, delivered, or used in thisState.
(f) Any cash surrendervalue and any paid‑up nonforfeiture benefit, available under the policyin the event of default in a premium payment due at any time other than on thepolicy anniversary, shall be calculated with allowance for the lapse of timeand the payment of fractional premiums beyond the last preceding policyanniversary. Any values referred to in subsections (c), (d) and (e) may becalculated upon the assumption that any death benefit is payable at the end ofthe policy year of death. The net value of any paid‑up additions, otherthan paid‑up term additions, shall be not less than the amounts used toprovide such additions. Notwithstanding the provisions of Section 3 [subsection(c)], additional benefits payable (i) in the event of death or dismemberment byaccident or accidental means, (ii) in the event of total and permanentdisability, (iii) as reversionary annuity or deferred reversionary annuitybenefits, (iv) as term insurance benefits provided by a rider or supplementalpolicy provision to which, if issued as a separate policy, this section wouldnot apply, (v) as term insurance on the life of a child or on the lives ofchildren provided in a policy on the life of a parent of the child, if suchterm insurance expires before the child's age is 26, is uniform in amount afterthe child's age is one, and has not become paid up by reason of the death of aparent of the child, and (vi) as other policy benefits additional to lifeinsurance and endowment benefits, and premiums for all such additionalbenefits, shall be disregarded in ascertaining cash surrender values andnonforfeiture benefits required by this section, and no such additionalbenefits shall be required to be included in any paid‑up nonforfeiturebenefits.
(f1) This subsection, inaddition to all other applicable subsections of this section, shall apply toall policies issued on or after January 1, 1985. Any cash surrender valueavailable under the policy in the event of default in a premium payment due onany policy anniversary shall be in an amount which does not differ by more thantwo‑tenths of one percent (2/10 of 1%) of either the amount of insurance,if the insurance be uniform in amount, or the average amount of insurance at thebeginning of each of the first 10 policy years, from the sum of (1) the greaterof zero and the basic cash value hereinafter specified and (2) the presentvalue of any existing paid‑up additions less the amount of anyindebtedness to the company under the policy.
The basic cash value shall beequal to the present value, on such anniversary, of the future guaranteedbenefits which would have been provided for by the policy, excluding anyexisting paid‑up additions and before deduction of any indebtedness tothe company, if there had been no default, less the then present value of thenonforfeiture factors, as hereinafter defined, corresponding to premiums whichwould have fallen due on and after such anniversary. Provided, however, thatthe effects on the basic cash value of supplemental life insurance or annuitybenefits or of family coverage, as described in subsection (c) or (e)(1),whichever is applicable, shall be the same as are the effects specified insubsection (c) or (e)(1), whichever is applicable, on the cash surrender valuesdefined in that subsection.
The nonforfeiture factor foreach policy year shall be an amount equal to a percentage of the adjustedpremium for the policy year, as defined in subsection (e)(1) or (e)(4),whichever is applicable. Except as is required by the next succeeding sentenceof this paragraph, such percentage:
(1) Must be the samepercentage for each policy year between the second policy anniversary and thelater of (i) the fifth policy anniversary and (ii) the first policy anniversaryat which there is available under the policy a cash surrender value in anamount, before including any paid‑up additions and before deducting anyindebtedness, of at least two‑tenths of one percent (2/10 of 1%) ofeither the amount of insurance, if the insurance be uniform in amount, or theaverage amount of insurance at the beginning of each of the first 10 policyyears; and
(2) Must be such that nopercentage after the later of the two policy anniversaries specified in thepreceding item (1) may apply to fewer than five consecutive policy years.
Provided, that no basic cashvalue may be less than the value which would be obtained if the adjustedpremiums for the policy, as defined in subsection (e)(1) or (e)(4), whicheveris applicable, were substituted for the nonforfeiture factors in thecalculation of the basic cash value.
All adjusted premiums andpresent values referred to in this subsection shall for a particular policy becalculated on the same mortality and interest bases as are used indemonstrating the policy's compliance with the other subsections of thissection. The cash surrender values referred to in this subsection shall includeany endowment benefits provided for by the policy.
Any cash surrender valueavailable other than in the event of default in a premium payment due on apolicy anniversary, and the amount of any paid‑up nonforfeiture benefitavailable under the policy in the event of default in a premium payment shallbe determined in manners consistent with the manners specified for determiningthe analogous minimum amounts in subsections (b), (c), (d), (e)(4), and (f).The amounts of any cash surrender values and of any paid‑up nonforfeiturebenefits granted in connection with additional benefits such as those listed asitems (i) through (vi) in subsection (f) shall conform with the principles ofthis subsection (f1).
(g) The provisions ofthis section shall not apply to any of the following:
(1) Industrial sickbenefit insurance as defined in Articles 1 through 64 of this Chapter,
(2) Reinsurance,
(3) Group insurance,
(4) Pure endowment,
(5) Annuity orreversionary annuity contract,
(6) Term policy ofuniform amount, which provides no guaranteed nonforfeiture or endowmentbenefits, or renewal thereof, of 20 years or less, for which uniform premiumsare payable during the entire term of the policy,
(7) Term policy ofdecreasing amount, which provides no guaranteed nonforfeiture or endowmentbenefits, on which each adjusted premium, calculated as specified in subsection(e), is less than the adjusted premium so calculated, on a term policy ofuniform amount, or renewal thereof, which provides no guaranteed nonforfeitureor endowment benefits, issued at the same age and for the same initial amountof insurance and for a term of 20 years or less expiring before age 71, forwhich uniform premiums are payable during the entire term of the policy,
(8) Policy, whichprovides no guaranteed nonforfeiture or endowment benefits, for which no cashsurrender value, if any, or present value of any paid‑up nonforfeiturebenefit, at the beginning of any policy year, calculated as specified insubsections (c), (d) and (e), exceeds two and one‑half percent (2 1/2%)of the amount of insurance at the beginning of the same policy year, nor
(9) Policy which shallbe delivered outside this State through an agent or other representative of thecompany issuing the policy.
For purposes of determining theapplicability of this section, the age at expiry for a joint term lifeinsurance policy shall be the age at expiry of the oldest life.
(h) After March 6,1945, any company may file with the Commissioner a written notice of itselection to comply with the provisions of this section after a specified datebefore January 1, 1950. After the filing of such notice then upon suchspecified date (which shall be the operative date for such company) thissection shall become operative with respect to the policies thereafter issuedby such company. If a company makes no such election, the operative date ofthis section for such company shall be January 1, 1950.
(i) For any singlepremium whole life or endowment insurance policy subject to subdivisions (e)(2)and (e)(3) of this section, a rate of interest not exceeding six and one‑halfpercent (6 1/2%) per annum may be used. (1945, c. 379; 1959, c. 484,s. 2; 1961, c. 255, ss. 4‑7; 1963, c. 791, ss. 3, 4; 1975, c. 603, ss. 2,3; 1979, c. 409, ss. 7‑9; 1981, c. 761, ss. 6‑14; 1991, c. 720, ss.19, 31; 1993, c. 452, ss. 57‑59.)
