§431:10H-233  Nonforfeiture benefitrequirement.  (a)  This section does not apply to life insurance policiescontaining accelerated long-term care benefits.

(b)  To comply with the requirement to offer anonforfeiture benefit pursuant to section 431:10H-116, the following shall bemet:

(1)  A policy or certificate offered withnonforfeiture benefits shall have coverage elements, eligibility, benefittriggers, and benefit length that are the same as coverage to be issued withoutnonforfeiture benefits.  The nonforfeiture benefit included in the offer shallbe the benefit described in subsection (j); and

(2)  The offer shall be in writing if thenonforfeiture benefit is not otherwise described in the outline of coverage orother materials given to the prospective policyholder.

(c)  If the offer required to be made undersection 431:10H-116 is rejected, the insurer shall provide the contingentbenefit upon lapse described in this section.  Even if this offer is acceptedfor a policy with a fixed or limited premium paying period, the contingentbenefit on lapse in subsection (g) shall still apply.

(d)  After rejection of the offer requiredunder section 431:10H-116, for individual and group policies withoutnonforfeiture benefits issued after June 30, 2000, the insurer shall provide acontingent benefit upon lapse.

(e)  If a group policyholder elects to make thenonforfeiture benefit an option to the certificate holder, a certificate shallprovide either the nonforfeiture benefit or the contingent benefit upon lapse.

(f)  The contingent benefit on lapse shall betriggered every time an insurer increases the premium rates to a level whichresults in a cumulative increase of the annual premium equal to or exceedingthe percentage of the insured's initial annual premium set forth in the tablebelow based on the insured's issue age, and the policy or certificate lapseswithin one hundred twenty days of the due date of the premium so increased. Unless otherwise required, policyholders and certificate holders shall benotified at least thirty days prior to the due date of the premium reflectingthe rate increase.

 

Triggers for aSubstantial Premium Increase

 

Per CentIncrease Over

Issue Age    InitialPremium    

 

29 and under 200%

30-34 190%

35-39 170%

40-44 150%

45-49 130%

50-54 110%

55-59 90%

60 70%

61 66%

62 62%

63 58%

64 54%

65 50%

66 48%

67 46%

68 44%

69 42%

70 40%

71 38%

72 36%

73 34%

74 32%

75 30%

76 28%

77 26%

78 24%

79 22%

80 20%

81 19%

82 18%

83 17%

84 16%

85 15%

86 14%

87 13%

88 12%

89 11%

90 and over 10%

 

(g)  A contingent benefit on lapse shall alsobe triggered for policies with a fixed or limited premium paying period everytime an insurer increases the premium rates to a level that results in acumulative increase of the annual premium equal to or exceeding the percentageof the insured's initial annual premium set forth below based on the insured'sissue age, the policy or certificate lapses within one hundred and twenty daysof the due date of the premium so increased, and the ratio in subsection (i)(2)is forty per cent or more.  Unless otherwise required, policyholders shall benotified at least thirty days prior to the due date of the premium reflectingthe rate increase.

 

Triggers for aSubstantial Premium Increase

 

Per Cent Increase Over

Issue Age InitialPremium

 

Under 65 50%

65-80 30%

Over 80 10%

 

This provision shall be in addition to the contingentbenefit provided by subsection (f) and where both are triggered, the benefitprovided shall be at the option of the insured.

(h)  On or before the effective date of asubstantial premium increase as defined in subsection (f), the insurer shall:

(1)  Offer to reduce policy benefits provided by thecurrent coverage without the requirement of additional underwriting so thatrequired premium payments are not increased;

(2)  Offer to convert the coverage to a paid-up statuswith a shortened benefit period in accordance with the terms of subsection(j).  This option may be elected at any time during the one-hundred-twenty-dayperiod referenced in subsection (f); and

(3)  Notify the policyholder or certificate holderthat a default or lapse at any time during the one-hundred-twenty-day periodunder subsection (f) shall be deemed to be the election offer to convert inparagraph (2), unless the automatic option in subsection (i)(3) applies.

(i)  On or before the effective date of asubstantial premium increase as defined in subsection (g) above, the insurershall:

(1)  Offer to reduce policy benefits provided by thecurrent coverage without the requirement of additional underwriting so thatrequired premium payments are not increased;

(2)  Offer to convert the coverage to a paid-up statuswhere the amount payable for each benefit is ninety per cent of the amount payablein effect immediately prior to lapse times the ratio of the number of completedmonths of paid premiums divided by the number of months in the premium payingperiod.  This option may be elected at any time during theone-hundred-twenty-day period referenced in subsection (g); and

(3)  Notify the policyholder or certificate holderthat a default or lapse at any time during the one-hundred-twenty-day periodreferenced in subsection (g) shall be deemed to be the election of the offer toconvert in paragraph (2) if the ratio is forty per cent or more.

(j)  Benefits continued as nonforfeiturebenefits, including contingent benefits upon lapse in accordance withsubsection (f) but not (g), are described in this subsection, as follows:

(1)  For purposes of this subsection, attained agerating is defined as a schedule of premiums starting from the issue date whichincreases age at least one per cent per year prior to age fifty, and at leastthree per cent per year beyond age fifty;

(2)  For purposes of this subsection, thenonforfeiture benefit shall be of a shortened benefit period providing paid-uplong-term care insurance coverage after lapse.  The same benefits (amounts andfrequency in effect at the time of lapse but not increased thereafter) shall bepayable for a qualifying claim, but the lifetime maximum dollars or days ofbenefits shall be determined as provided in paragraph (3);

(3)  The standard nonforfeiture credit shall be equalto one hundred per cent of the sum of all premiums paid, including the premiumspaid prior to any changes in benefits.  The insurer may offer additionalshortened benefit period options, as long as the benefits for each durationequal or exceed the standard forfeiture credit for that duration.  However, theminimum nonforfeiture credit shall not be less than thirty times the dailynursing home benefit at the time of lapse.  In either event, the calculation ofthe nonforfeiture credit is subject to the limitation of subsection (k);

(4)  The nonforfeiture benefit shall begin not laterthan the end of the third year following the policy or certificate issue date;provided that the contingent benefit upon lapse shall be effective during thefirst three years and thereafter;

(5)  Notwithstanding the provisions in paragraph (4),for a policy or certificate with attained age rating, the nonforfeiture benefitshall begin on the earlier of:

(A)  The end of the tenth year following thepolicy or certificate issue date; or

(B)  The end of the second year following thedate the policy or certificate is no longer subject to attained age rating; and

(6)  Nonforfeiture credits may be used for all careand services qualifying for benefits under the terms of the policy orcertificate, up to the limits specified in the policy or certificate.

(k)  All benefits paid by the insurer while thepolicy or certificate is in premium paying status and in paid up status shallnot exceed the maximum benefits which would be payable if the policy orcertificate had remained in premium paying status.

(l)  There shall be no difference in theminimum nonforfeiture benefits as required under this section for group andindividual policies.

(m)  The requirements set forth in this sectionshall become effective July 1, 2000, and shall apply as follows:

(1)  This section shall apply to any long-term carepolicy issued in this State after June 30, 2000; and

(2)  For certificates issued after June 30, 2000,under a group long-term care insurance policy as defined in paragraph (1) underthe definition of "group long-term care insurance" in section431:10H-104, which policy was in force on July 1, 2000, this section shall notapply;

provided that the provisions in subsections (c),(g), and (i) that pertain to contingent benefits for a policy with a fixed orlimited premium paying period shall apply to any long-term care insurancepolicy or certificate issued in the State after December 31, 2007; providedfurther that for new certificates on a group policy as defined in section431:10H-104, the provisions in subsections (c), (g), and (i) that pertain tocontingent benefits for a policy with a fixed or limited premium paying periodshall apply after July 1, 2008.

(n)  Premiums charged for a policy orcertificate containing nonforfeiture benefits or contingent benefit on lapseshall be subject to the loss ratio requirements of section 431:10H-207.5 or431:10H-226, whichever is applicable, treatingthe policy as a whole.

(o)  To determine whether contingentnonforfeiture upon lapse provisions are triggered under subsection (f) or (g),a replacing insurer that purchased or otherwise assumed a block or blocks oflong-term care insurance policies from another insurer shall calculate thepercentage increase based on the initial annual premium paid by the insuredwhen the policy was first purchased from the original insurer.

(p)  A nonforfeiture benefit for qualifiedlong-term care insurance contracts that are level premium contracts shall beoffered that meets the following requirements:

(1)  The nonforfeiture provision shall be appropriatelycaptioned;

(2)  The nonforfeiture provision shall provide abenefit available in the event of a default in the payment of any premiums andshall state that the amount of the benefit may be adjusted subsequent to beinginitially granted only as necessary to reflect changes in claims, persistency,and interest as reflected in changes in rates for premium paying contractsapproved by the commissioner for the same contract form; and

(3)  The nonforfeiture provision shall provide atleast one of the following:

(A)  Reduced paid-up insurance;

(B)  Extended term insurance;

(C)  Shortened benefit period; or

(D)  Other similar offerings approved by thecommissioner. [L 1999, c 93, pt of §2; am L 2007, c 233, §24; am L 2009, c 49,§4]