§431:10D-405 - Standards for basic illustrations.

[§431:10D-405] Standards for basic
illustrations. (a) The format of a basic illustration shall conform with
the following requirements:

(1) The illustration shall be labeled with the date
on which it was prepared;

(2) Each page, including any explanatory notes or
pages, shall be numbered and show its relationship to the total number of pages
in the illustration (e.g., the fourth page of a seven page illustration shall
be labeled "page 4 of 7 pages");

(3) The assumed dates of payment receipt and benefit
pay out within a policy year shall be clearly identified;

(4) If the age of the proposed insured is shown as a
component of the tabular detail, the age shown shall be the age of the insured
at the time the policy is issued plus the numbers of years the policy is
assumed to have been in force;

(5) The assumed payments on which the illustrated
benefits and values are based shall be identified as premium outlay or contract
premium, as applicable. For policies that do not require a specific contract
premium, the illustrated payments shall be identified as premium outlay;

(6) Guaranteed death benefits and values available
upon surrender, if any, for the illustrated premium outlay or contract premium
shall be shown and clearly labeled guaranteed;

(7) If the illustration shows any nonguaranteed
elements, they shall not be based on a scale more favorable to the policy owner
than the insurer's illustrated scale at any duration. These elements shall be
clearly labeled nonguaranteed;

(8) The guaranteed elements, if any, shall be shown
before corresponding nonguaranteed elements and shall be specifically referred
to on any page of an illustration that shows or describes only the
nonguaranteed elements (e.g., "see page one for guaranteed
elements");

(9) The account or accumulation value of a policy, if
shown, shall be identified by the name this value is given in the policy being
illustrated and shown in close proximity to the corresponding value available
upon surrender;

(10) The value available upon surrender shall be
identified by the name this value is given in the policy being illustrated and
shall be the amount available to the policy owner in a lump sum after deduction
of surrender charges, policy loans, and policy loan interest, as applicable;

(11) Illustrations may show policy benefits and values
in graphic or chart form in addition to the tabular form;

(12) Any illustration of nonguaranteed elements shall
be accompanied by a statement indicating that:

(A) The benefits and values are not
guaranteed;

(B) The assumptions on which they are based
are subject to change by the insurer; and

(13) If the illustration shows that the premium payer
may have the option to allow policy charges to be paid using nonguaranteed
values, the illustration shall clearly disclose that a charge continues to be
required and that, depending on actual results, the premium payer may need to
continue or resume premium outlays. Similar disclosure shall be made for
premium outlay of lesser amounts or shorter durations than the contract
premium. If a contract premium is due, the premium outlay display shall not be
left blank or show zero unless accompanied by an asterisk or similar mark to
draw attention to the fact that the policy is not paid up; and

(14) If the applicant plans to use dividends or policy
values, guaranteed or nonguaranteed, to pay all or a portion of the contract
premium or policy charges, or for any other purpose, the illustration may
reflect those plans and the impact on future policy benefits and values.

(b) A basic illustration shall include a
narrative summary which shall include the following:

(1) A brief description of the policy being
illustrated, including a statement that it is a life insurance policy;

(2) A brief description of the premium outlay or
contract premium, as applicable, for the policy. For a policy that does not
require payment of a specific contract premium, the illustration shall show the
premium outlay that must be paid to guarantee coverage for the term of the
contract, subject to maximum premiums allowable to qualify as a life insurance
policy under the applicable provisions of the Internal Revenue Code of 1986, as
amended;

(3) A brief description of any policy features,
riders, or options, guaranteed or nonguaranteed, shown in the basic
illustration and the impact they may have on the benefits and values of the
policy;

(4) Identification and a brief definition of column
headings and key terms used in the illustration; and

(5) A statement containing in substance the
following:

"This illustration assumes that the
currently illustrated nonguaranteed elements will continue unchanged for all
years shown. This is not likely to occur, and actual results may be more or
less favorable than those shown."

(c) Following the narrative summary, a basic
illustration shall include a numeric summary of the death benefits and values
and the premium outlay and contract premium, as applicable, provided that:

(1) For a policy that provides for a contract
premium, the guaranteed death benefits and values shall be based on the
contract premium. This summary shall be shown for at least policy years five,
ten, and twenty and at age seventy, if applicable, on the three bases shown
below. For multiple life policies the summary shall show policy years five,
ten, twenty, and thirty. The illustration shall include:

(A) Policy guarantees;

(B) The insurer's illustrated scale;

(i) Dividends at fifty per cent of the
dividends contained in the illustrated scale used;

(ii) Nonguaranteed credited interest at rates
that are the average of the guaranteed rates and the rates contained in the
illustrated scale used; and

(iii) All nonguaranteed charges, including but
not limited to, term insurance charges and mortality and expense charges, at
rates that are the average of the guaranteed rates, and the rates contained in
the illustrated scale used; and

(2) If coverage would cease prior to policy maturity
or age one hundred, the year in which coverage ceases shall be identified for
each of the three bases.

(d) The following statements shall be included
on the same page as the numeric summary and signed by the applicant, or the
policy owner in the case of an illustration provided at time of delivery, as
required in this part:

(1) A statement to be signed and dated by the
applicant or policy owner reading as follows:

"I have received a copy of this
illustration and understand that any nonguaranteed elements illustrated are
subject to change and could be either higher or lower. The agent has told me
they are not guaranteed."; and

(2) A statement to be signed and dated by the
insurance producer or other authorized representative of the insurer reading as
follows:

"I certify that this illustration has
been presented to the applicant and that I have explained that any
nonguaranteed elements illustrated are subject to change. I have made no
statements that are inconsistent with the illustration."

(e) A basic illustration shall include the
following details:

(1) For at least each policy year from one to ten and
for every fifth policy year thereafter ending at age one hundred, policy
maturity or final expiration; and except for term insurance beyond the
twentieth year, for any year in which the premium outlay and contract premium,
if applicable, is to change:

(A) The premium outlay and mode the applicant
plans to pay and the contract premium, as applicable;

(B) The corresponding guaranteed death
benefit, as provided in the policy; and

(2) For a policy that provides for a contract
premium, the guaranteed death benefit and value available upon surrender shall
correspond to the contract premium; and

(3) Nonguaranteed elements may be shown if described
in the contract. In the case of an illustration for a policy on which the
insurer intends to credit terminal dividends, they may be shown if the
insurer's current practice is to pay terminal dividends, provided that:

(A) If any nonguaranteed elements are shown
they must be shown at the same durations as the corresponding guaranteed
elements, if any; and

(B) If no guaranteed benefit or value is
available at any duration for which a nonguaranteed benefit or value is shown,
a zero shall be displayed in the guaranteed column. [L 2000, c 252, pt of §2]