Full Text of SB2764 98th General Assembly
SB2764 98TH GENERAL ASSEMBLY |
| | 98TH GENERAL ASSEMBLY
State of Illinois
2013 and 2014 SB2764 Introduced 1/28/2014, by Sen. William R. Haine SYNOPSIS AS INTRODUCED: |
|
215 ILCS 5/229.2 | from Ch. 73, par. 841.2 |
|
Amends the Illinois Insurance Code. Makes a technical change in a Section
concerning the standard non-forfeiture law for life insurance.
|
| |
| | A BILL FOR |
|
| | | SB2764 | | LRB098 19432 RPM 54594 b |
|
| 1 | | AN ACT concerning regulation.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Illinois Insurance Code is amended by | 5 | | changing Section 229.2 as follows:
| 6 | | (215 ILCS 5/229.2) (from Ch. 73, par. 841.2)
| 7 | | Sec. 229.2. Standard Non-forfeiture Law for Life | 8 | | Insurance. (1) No policy of
of life insurance, except as stated | 9 | | in subsection (8),
shall be delivered or issued for delivery in | 10 | | this
State unless it contains in
substance the following | 11 | | provisions or corresponding provisions which in
the opinion of | 12 | | the Director are at least as favorable to the defaulting
or | 13 | | surrendering policyholder and are essentially in compliance | 14 | | with subsection
(7) of this law:
| 15 | | (i) That, in the event of default in any premium payment, | 16 | | the
company will grant, upon proper request not later than 60 | 17 | | days after the
due date of the premium in default, a paid-up | 18 | | nonforfeiture
benefit on
a plan stipulated in the policy, | 19 | | effective as of such due date, of such
amount as may be | 20 | | hereinafter specified. In lieu of such
stipulated paid-up | 21 | | nonforfeiture benefit, the company may substitute, upon
proper | 22 | | request not later than 60 days after the due date of the | 23 | | premium
in default, an actuarially equivalent alternative |
| | | SB2764 | - 2 - | LRB098 19432 RPM 54594 b |
|
| 1 | | paid-up nonforfeiture
benefit which provides a greater amount | 2 | | or longer period of death benefits
or, if applicable, a greater | 3 | | amount or earlier payment of endowment benefits.
| 4 | | (ii) That, upon surrender of the policy within 60 days | 5 | | after the due
date of any premium payment in default after | 6 | | premiums have been paid for
at least 3 full years in the case | 7 | | of Ordinary insurance or 5 full years
in the case of Industrial | 8 | | insurance, the company will pay, in lieu of
any paid-up | 9 | | nonforfeiture benefit, a cash surrender value of such
amount as | 10 | | may be hereinafter specified.
| 11 | | (iii) That a specified paid-up nonforfeiture benefit
shall | 12 | | become
effective as specified in the policy unless the person | 13 | | entitled to make
such election elects another available option | 14 | | not later than 60 days
after the due date of the premium in | 15 | | default.
| 16 | | (iv) That, if the policy shall have become paid-up by | 17 | | completion of
all premium payments or if it is continued under | 18 | | any paid-up
nonforfeiture benefit which became effective on or
| 19 | | after the third
policy anniversary in the case of Ordinary | 20 | | insurance or the fifth policy
anniversary in the case of | 21 | | Industrial insurance, the company will pay,
upon surrender of | 22 | | the policy within 30 days after any policy
anniversary, a cash | 23 | | surrender value of such amount as may be hereinafter
specified.
| 24 | | (v) In the case of policies which cause on a basis | 25 | | guaranteed in the
policy unscheduled changes in benefits or | 26 | | premiums, or which provide an
option for changes in benefits or |
| | | SB2764 | - 3 - | LRB098 19432 RPM 54594 b |
|
| 1 | | premiums other than a change to a new
policy, a statement of | 2 | | the mortality table, interest rate, and method used
in | 3 | | calculating cash surrender values and the paid-up | 4 | | nonforfeiture benefits
available under the policy. In the case | 5 | | of all other policies,
a statement of the mortality table and | 6 | | interest rate used in
calculating the cash surrender values and | 7 | | the paid-up nonforfeiture
benefits available under the policy, | 8 | | together with a table showing the
cash surrender value, if any, | 9 | | and paid-up nonforfeiture
benefit, if
any, available under the | 10 | | policy on each policy anniversary either during
the first 20 | 11 | | policy years or during the term of the policy, whichever is
| 12 | | shorter, such values and benefits to be calculated upon the | 13 | | assumption
that there are no dividends or paid-up additions | 14 | | credited to the policy
and that there is no indebtedness to the | 15 | | company on the policy.
| 16 | | (vi) A statement that the cash surrender values and the | 17 | | paid-up
nonforfeiture benefits available under the policy
are | 18 | | not less than the
minimum values and benefits required by or | 19 | | pursuant to the insurance law
of the state in which the policy | 20 | | is delivered; an explanation of the
manner in which the cash | 21 | | surrender values and the paid-up nonforfeiture
benefits are | 22 | | altered by the existence of any paid-up additions credited
to | 23 | | the policy or any indebtedness to the company on the policy; if | 24 | | a
detailed statement of the method of computation of the values | 25 | | and
benefits shown in the policy is not stated therein, a | 26 | | statement that
such method of computation has been filed with |
| | | SB2764 | - 4 - | LRB098 19432 RPM 54594 b |
|
| 1 | | the insurance supervisory
official of the state in which the | 2 | | policy is delivered; and a statement
of the method to be used | 3 | | in calculating the cash surrender value and
paid-up | 4 | | nonforfeiture benefit available under the
policy on any policy
| 5 | | anniversary beyond the last anniversary for which such values | 6 | | and
benefits are consecutively shown in the policy.
| 7 | | Any of the foregoing provisions or portions thereof not | 8 | | applicable by
reason of the plan of insurance may, to the | 9 | | extent inapplicable, be
omitted from the policy.
| 10 | | The company shall reserve the right to defer the payment of | 11 | | any cash
surrender value for a period of 6 months after demand | 12 | | therefor with
surrender of the policy.
| 13 | | (2) (i) Any cash surrender value available under the policy | 14 | | in the event
of default in a premium payment due on any policy | 15 | | anniversary, whether
or not required by subsection (1), shall | 16 | | be an amount not less than the
excess, if any, of the present | 17 | | value, on such anniversary, of the future
guaranteed benefits | 18 | | which would have been provided for by the policy,
including any | 19 | | existing paid-up additions, if there had been no default,
over | 20 | | the sum of (i) the then present value of the adjusted premiums | 21 | | as
defined in subsections 4, 4(a), 4(b) and 4(c), corresponding
| 22 | | to premiums which
would have fallen due on and after such | 23 | | anniversary, and (ii) the amount
of any indebtedness to the | 24 | | company on the policy.
| 25 | | (ii) For any policy issued on or after the operative date | 26 | | of subsection
4(c), which provides supplemental life insurance |
| | | SB2764 | - 5 - | LRB098 19432 RPM 54594 b |
|
| 1 | | or annuity benefits at
the option of the insured for an | 2 | | identifiable additional premium by rider
or supplemental | 3 | | policy provision,
the cash surrender value shall be an amount | 4 | | not less than the sum of the
cash surrender value as determined | 5 | | in paragraph (i) for an otherwise similar
policy issued at the | 6 | | same age without such rider or supplemental policy
provision | 7 | | and the cash surrender value as determined in such paragraph | 8 | | for
a policy which provides only the benefits otherwise | 9 | | provided by such rider
or supplemental policy provision.
| 10 | | (iii) For any family policy issued on or after the | 11 | | operative date of subsection
4(c), which defines a primary | 12 | | insured and provides term insurance on the
life of the spouse | 13 | | of the primary insured expiring before the spouse attains
age | 14 | | 71, the cash surrender value shall be an amount not less than | 15 | | the sum
of the cash surrender value as determined in paragraph | 16 | | (i) for an otherwise
similar policy issued at the same age | 17 | | without such term insurance on the
life of the spouse and the | 18 | | cash surrender value as determined in such paragraph
for a | 19 | | policy which provides only the benefits otherwise provided by | 20 | | such
term insurance on the life of the spouse.
| 21 | | (iv) Any cash surrender
value available within 30 days | 22 | | after any policy anniversary under any
policy paid up by | 23 | | completion of all premium payments or any policy
continued | 24 | | under any paid-up nonforfeiture benefit, whether or not
| 25 | | required by subsection (1), shall be an amount not less than | 26 | | the present
value, on such anniversary, of the future |
| | | SB2764 | - 6 - | LRB098 19432 RPM 54594 b |
|
| 1 | | guaranteed benefits provided
for by the policy, including any | 2 | | existing paid-up additions, decreased
by any indebtedness to | 3 | | the company on the policy.
| 4 | | (3) Any paid-up nonforfeiture benefit available
under the | 5 | | policy in
the event of default in a premium payment due on any | 6 | | policy anniversary
shall be such that its present value as of | 7 | | such anniversary shall be at
least equal to the cash surrender | 8 | | value then provided for by the policy,
or if none is provided | 9 | | for, that cash surrender value which would have
been required | 10 | | by this section in the absence of the condition that
premiums | 11 | | shall have been paid for at least a specified period.
| 12 | | (4) This subsection (4) shall not apply to policies issued | 13 | | on or after
the operative date of subsection (4c). Except as | 14 | | provided in the third
paragraph of this subsection,
the | 15 | | adjusted premiums for any policy shall be calculated on an | 16 | | annual
basis and shall be such uniform percentage of the | 17 | | respective premium
specified in the policy for each policy | 18 | | year, excluding any extra
premiums charged because of | 19 | | impairments or special hazards, that the
present value, at the | 20 | | date of issue of the policy, of all such adjusted
premiums | 21 | | shall be equal to the sum of (i) the then present value of the
| 22 | | future guaranteed benefits provided for by the policy; (ii) 2% | 23 | | of the
amount of insurance, if the insurance be uniform in | 24 | | amount, or of the
equivalent uniform amount, as hereinafter | 25 | | defined, if the amount of
insurance varies with duration of the | 26 | | policy; (iii) 40% of the adjusted
premium for the first policy |
| | | SB2764 | - 7 - | LRB098 19432 RPM 54594 b |
|
| 1 | | year; (iv) 25% of either the adjusted
premium for the first | 2 | | policy year or the adjusted premium for a whole
life policy of | 3 | | the same uniform or equivalent uniform amount with
uniform | 4 | | premiums for the whole of life issued at the same age for the
| 5 | | same amount of insurance, whichever is less. Provided, however, | 6 | | that in
applying the percentages specified in (iii) and (iv) | 7 | | above, no adjusted
premium shall be deemed to exceed 4% of the | 8 | | amount of insurance or
uniform amount equivalent thereto. The | 9 | | date of issue of a policy for the
purpose of this subsection | 10 | | shall be the date as of which the rated age
of the insured is | 11 | | determined.
| 12 | | In the case of a policy providing an amount of insurance | 13 | | varying with
duration of the policy, the equivalent uniform | 14 | | amount thereof for the
purpose of this subsection shall be | 15 | | deemed to be the level amount of
insurance, provided by an | 16 | | otherwise similar policy, containing the same
endowment | 17 | | benefit or benefits, if any, issued at the same age and for
the | 18 | | same term, the amount of which does not vary with duration and | 19 | | the
benefits under which have the same present value at the | 20 | | inception of the
insurance as
the benefits under the policy; | 21 | | provided, however, that in the case of a
policy providing a | 22 | | varying amount of insurance issued on the life of a
child under | 23 | | age 10, the equivalent uniform amount may be computed as
though | 24 | | the amount of insurance provided by the policy prior to the
| 25 | | attainment of age 10 were the amount provided by such policy at | 26 | | age 10.
|
| | | SB2764 | - 8 - | LRB098 19432 RPM 54594 b |
|
| 1 | | The adjusted premiums for any policy providing term | 2 | | insurance
benefits by rider or supplemental policy provision | 3 | | shall be equal to (a)
the adjusted premiums for an otherwise | 4 | | similar policy issued at the same
age without such term | 5 | | insurance benefits, increased, during the period
for which | 6 | | premiums for such term insurance benefits are payable, by (b)
| 7 | | the adjusted premiums for such term insurance, the foregoing | 8 | | items (a)
and (b) being calculated separately and as specified | 9 | | in the first 2
paragraphs of this subsection except that, for | 10 | | the purposes of (ii),
(iii) and (iv) of the first such | 11 | | paragraph, the amount of insurance or
equivalent uniform amount | 12 | | of insurance used in the calculation of the
adjusted premiums | 13 | | referred to in (b) shall be equal to the excess of the
| 14 | | corresponding amount determined for the entire policy over the | 15 | | amount
used in the calculation of the adjusted premiums in (a).
| 16 | | Except as otherwise provided in subsections (4a) and (4b), | 17 | | all
adjusted premiums and present values referred to in this | 18 | | section shall
for all policies of Ordinary insurance be | 19 | | calculated on the basis of the
Commissioners 1941 Standard | 20 | | Ordinary Mortality Table, provided that for
any category of | 21 | | Ordinary insurance issued on female risks adjusted
premiums and | 22 | | present values may be calculated according to an age not
more | 23 | | than 3 years younger than the actual age of the insured, and | 24 | | such
calculations for all policies of Industrial insurance | 25 | | shall be made on
the basis of the 1941 Standard Industrial | 26 | | Mortality Table. All
calculations shall be made on the basis of |
| | | SB2764 | - 9 - | LRB098 19432 RPM 54594 b |
|
| 1 | | the rate of interest, not
exceeding 3 1/2% per annum, specified | 2 | | in the policy for calculating cash
surrender values and paid-up | 3 | | nonforfeiture benefits.
Provided, however,
that in calculating | 4 | | the present value of any paid-up term insurance with
| 5 | | accompanying pure endowment, if any, offered as a nonforfeiture
| 6 | | benefit, the rates of mortality assumed may be not more than | 7 | | 130% of the
rates of mortality according to such applicable | 8 | | table. Provided,
further, that for insurance issued on a | 9 | | substandard basis, the
calculation of any such adjusted | 10 | | premiums and present values may be
based on such other table of | 11 | | mortality as may be specified by the
company and approved by | 12 | | the Director.
| 13 | | (4a) This subsection (4a) shall not apply to Ordinary | 14 | | policies issued
on or after the operative date of subsection | 15 | | (4c). In the case of Ordinary
policies issued on or after the
| 16 | | operative date of this subsection (4a) as defined herein, all | 17 | | adjusted
premiums and present values referred to in this | 18 | | Section shall be
calculated on the basis of the Commissioners | 19 | | 1958 Standard Ordinary
Mortality Table and the rate of interest | 20 | | specified in the policy for calculating
cash surrender values | 21 | | and
paid-up nonforfeiture benefits, provided that such
rate of | 22 | | interest shall not exceed 3 1/2% per annum except that a rate | 23 | | of
interest not exceeding 5 1/2% per annum may be used for | 24 | | policies issued
on or after September 8, 1977, except that for | 25 | | any single premium
whole life or endowment insurance policy a | 26 | | rate of interest not exceeding
6 1/2% per annum may be used and |
| | | SB2764 | - 10 - | LRB098 19432 RPM 54594 b |
|
| 1 | | provided that for any category of
Ordinary insurance issued on | 2 | | female risks, adjusted premiums and present
values may be | 3 | | calculated according to an age not more than 6 years
younger | 4 | | than the actual age of the insured. Provided, however, that in
| 5 | | calculating the present value of any paid-up term insurance | 6 | | with
accompanying pure endowment, if any, offered as a | 7 | | nonforfeiture
benefit, the rates of mortality assumed may be | 8 | | not more than those shown
in the Commissioners 1958 Extended | 9 | | Term Insurance Table. Provided,
however, that for insurance | 10 | | issued on a substandard basis, the
calculation for any such | 11 | | adjusted premiums and present values may be
based on such other | 12 | | table of mortality as may be specified by the
company and | 13 | | approved by the Director. After the effective date of this
| 14 | | subsection (4a), any company may file with the Director written | 15 | | notice
of its election to comply with the provisions of this | 16 | | subsection after a
specified date before January 1, 1966. After | 17 | | the filing of such notice,
then upon such specified date (which | 18 | | shall be the operative date of this
subsection for such | 19 | | company), this subsection shall become operative
with respect | 20 | | to the Ordinary policies thereafter issued by such company.
If | 21 | | a company makes no such election, the operative date of this
| 22 | | subsection for such company shall be January 1, 1966.
| 23 | | (4b) This subsection (4b) shall not apply to Industrial | 24 | | policies issued
on or after the operative date of subsection | 25 | | (4c). In the case of Industrial
policies issued on or after the
| 26 | | operative date of this subsection (4b) as defined herein, all |
| | | SB2764 | - 11 - | LRB098 19432 RPM 54594 b |
|
| 1 | | adjusted
premiums and present values referred to in this | 2 | | Section shall be
calculated on the basis of the Commissioners | 3 | | 1961 Standard Industrial
Mortality Table and the rate of | 4 | | interest specified in the policy for calculating
cash surrender | 5 | | values and
paid-up nonforfeiture benefits, provided that such
| 6 | | rate of interest shall not exceed 3 1/2% per annum except that | 7 | | a rate of
interest not exceeding
5 1/2% per annum may be used | 8 | | for policies issued on or after September
8, 1977, except
that | 9 | | for any single premium whole life or endowment insurance policy | 10 | | a rate
of interest not exceeding 6 1/2% per annum may be used. | 11 | | Provided, however,
that in calculating
the present value of any | 12 | | paid-up term insurance with accompanying pure
endowment, if | 13 | | any, offered as a nonforfeiture benefit,
the rates of
mortality | 14 | | assumed may be not more than those shown in the Commissioners
| 15 | | 1961 Industrial Extended Term Insurance Table. Provided, | 16 | | further, that
for insurance issued on a substandard basis, the | 17 | | calculations of any
such adjusted premiums and present values | 18 | | may be based on such other
table of mortality as may be | 19 | | specified by the company and approved by
the Director. After | 20 | | the effective date of this subsection (4b), any
company may | 21 | | file with the Director a written notice of its election to
| 22 | | comply with the provisions of this subsection after a specified | 23 | | date
before January 1, 1968. After the filing of such notice, | 24 | | then upon such
specified date (which shall be the operative | 25 | | date of this subsection for
such company), this subsection | 26 | | shall become operative with respect to
the Industrial policies |
| | | SB2764 | - 12 - | LRB098 19432 RPM 54594 b |
|
| 1 | | thereafter issued by such company. If a company
makes no such | 2 | | election, the operative date of this subsection for such
| 3 | | company shall be January 1, 1968.
| 4 | | (4c)(a) This subsection shall apply to all policies issued | 5 | | on or after
its operative date. Except as provided in paragraph | 6 | | (g), the adjusted premiums
for any policy shall be calculated | 7 | | on an annual basis and shall be such
uniform percentage of the | 8 | | respective premiums specified in the policy for
each policy | 9 | | year, excluding amounts payable as extra premiums to cover | 10 | | impairments
or special hazards and any uniform annual contract | 11 | | charge or policy fee
specified in the policy in a statement of | 12 | | the method to be used in calculating
the cash surrender value | 13 | | and paid-up nonforfeiture benefits of the policy,
that the | 14 | | present value, at the date of issue of the policy, of all | 15 | | adjusted
premiums shall be equal to the sum of (i) the then | 16 | | present value of the
future guaranteed benefits provided for by | 17 | | the policy; (ii) 1% of either
the amount of insurance, if the | 18 | | insurance is uniform in amount, or the average
amount of | 19 | | insurance at the beginning of each of the first 10 policy | 20 | | years;
and (iii) 125% of the nonforfeiture net level premium as | 21 | | hereinafter defined.
In applying the percentage specified in | 22 | | (iii), however,
no nonforfeiture net level premium shall exceed | 23 | | 4% of either the amount
of insurance, if the insurance is | 24 | | uniform in amount, or the average amount
of insurance at the | 25 | | beginning of each of the first 10 policy years. The
date of | 26 | | issue of a policy for the purpose of this subsection is the |
| | | SB2764 | - 13 - | LRB098 19432 RPM 54594 b |
|
| 1 | | date
as of which the rated age of the insured is determined.
| 2 | | (b) The nonforfeiture net level premium equals the present | 3 | | value, at the
date of issue of the policy, of the guaranteed | 4 | | benefits provided for by
the policy divided by the present | 5 | | value, at the date of issue of the policy,
of an annuity of one | 6 | | per annum payable on the date of issue of the policy
and on | 7 | | each anniversary of such policy on which a premium falls due.
| 8 | | (c) In the case of a policy which causes, on a basis | 9 | | guaranteed in such
policy, unscheduled changes in benefits or | 10 | | premiums, or which provides an
option for changes in benefits | 11 | | or premiums other than a change to a new
policy, adjusted | 12 | | premiums and present values shall initially be calculated
on | 13 | | the assumption that future benefits and premiums do not change | 14 | | from those
stipulated at the date of issue of such policy. At | 15 | | the time of any such
change in the benefits or premiums, the | 16 | | future adjusted premiums, nonforfeiture
net level premiums and | 17 | | present values shall be recalculated on the assumption
that | 18 | | future benefits and premiums do not change from those | 19 | | stipulated by
such policy immediately after the change.
| 20 | | (d) Except as otherwise provided in paragraph (g), the | 21 | | recalculated future
adjusted premiums for any policy shall be | 22 | | such uniform percentage of the
respective future premiums | 23 | | specified in the policy for each policy year,
excluding amounts | 24 | | payable as extra premiums to cover impairments and special
| 25 | | hazards and any uniform annual contract charge or policy fee | 26 | | specified in
the policy in a statement of the method to be used |
| | | SB2764 | - 14 - | LRB098 19432 RPM 54594 b |
|
| 1 | | in calculating the cash
surrender values and paid-up | 2 | | nonforfeiture benefits, that the present value,
at the time of | 3 | | change to the newly defined benefits or premiums, of all
such | 4 | | future adjusted premiums shall be equal to the excess of (A) | 5 | | the sum
of (i) the then present value of the then future | 6 | | guaranteed benefits provided
for by the policy and (ii) the | 7 | | additional expense allowance, if any, over
(B) the then cash | 8 | | surrender value, if any, or present value of any paid-up
| 9 | | nonforfeiture benefit under the policy.
| 10 | | (e) The additional expense allowance at the time of the | 11 | | change to the
newly defined benefits or premiums shall be the | 12 | | sum of
(i) 1% of the excess, if positive, of the average amount | 13 | | of insurance at
the beginning of each of the first 10 policy | 14 | | years subsequent to the change
over the average amount of | 15 | | insurance prior to the change at the beginning
of each of the | 16 | | first 10 policy years subsequent to the time of the most
recent | 17 | | previous change, or, if there has been no previous change, the | 18 | | date
of issue of the policy; and (ii) 125% of the increase, if | 19 | | positive, in
the nonforfeiture net level premium.
| 20 | | (f) The recalculated nonforfeiture net level premium | 21 | | equals the result
obtained by dividing X by Y, where
| 22 | | (i) X equals the sum of
| 23 | | (A) the nonforfeiture net level premium applicable prior to | 24 | | the change
times the present value of an annuity of one per | 25 | | annum payable on each anniversary
of the policy on or | 26 | | subsequent to the date of the change on which a premium
would |
| | | SB2764 | - 15 - | LRB098 19432 RPM 54594 b |
|
| 1 | | have fallen due had the change not occurred, and
| 2 | | (B) the present value of the increase in future guaranteed | 3 | | benefits provided
for by the policy; and
| 4 | | (ii) Y equals the present value of an annuity of one per | 5 | | annum payable
on each anniversary of the policy on or | 6 | | subsequent to the date of change
on which a premium falls due.
| 7 | | (g) Notwithstanding any other provisions of this | 8 | | subsection to the contrary,
in the case of a policy issued on a | 9 | | substandard basis which provides reduced
graded amounts of | 10 | | insurance so that, in each policy year, such policy has
the | 11 | | same tabular mortality cost as an otherwise similar policy | 12 | | issued on
the standard basis which provides higher uniform | 13 | | amounts of insurance, adjusted
premiums and present values for | 14 | | such substandard policy may be calculated
as if it were issued | 15 | | to provide such higher uniform amounts of insurance
on the | 16 | | standard basis.
| 17 | | (h) All adjusted premiums and present values referred to in | 18 | | this Section
shall for all policies of ordinary insurance be | 19 | | calculated on the basis
of the Commissioners 1980 Standard | 20 | | Ordinary Mortality Table or, at the election
of the company for | 21 | | any one or more specified plans of life
insurance, the | 22 | | Commissioners 1980 Standard Ordinary Mortality Table with
| 23 | | Ten-Year Select Mortality Factors. All adjusted premiums and | 24 | | present values
referred to in this Section shall for all | 25 | | policies of Industrial insurance
be calculated on the basis of | 26 | | the Commissioners 1961 Standard Industrial
Mortality Table. |
| | | SB2764 | - 16 - | LRB098 19432 RPM 54594 b |
|
| 1 | | All adjusted premiums and present values referred to in
this | 2 | | Section for all policies issued in a particular calendar year | 3 | | shall
be calculated on the basis of a rate of interest not | 4 | | exceeding
the nonforfeiture interest rate as defined in this | 5 | | subsection for policies
issued in that calendar year. The | 6 | | provisions of this paragraph are subject
to the provisions set | 7 | | forth in subparagraphs (i) through (vii).
| 8 | | (i) At the option of the company, calculations for all | 9 | | policies issued
in a particular calendar year may be made on | 10 | | the basis of a rate of interest
not exceeding the nonforfeiture | 11 | | interest rate, as defined in this subsection,
for policies | 12 | | issued in the immediately preceding calendar year.
| 13 | | (ii) Under any paid-up nonforfeiture benefit, including | 14 | | any paid-up dividend
additions, any cash surrender value | 15 | | available, whether or not required by
subsection (1), shall be | 16 | | calculated on the basis of the mortality table
and rate of | 17 | | interest used in determining the amount of such paid-up | 18 | | nonforfeiture
benefit and paid-up dividend additions, if any.
| 19 | | (iii) A company may calculate the amount of any guaranteed | 20 | | paid-up nonforfeiture
benefit, including any paid-up additions | 21 | | under the policy, on the basis
of an interest rate no lower | 22 | | than that specified in the policy for calculating
cash | 23 | | surrender values.
| 24 | | (iv) In calculating the present value of any paid-up term | 25 | | insurance with
an accompanying pure endowment, if any, offered | 26 | | as a nonforfeiture benefit,
the rates of mortality assumed may |
| | | SB2764 | - 17 - | LRB098 19432 RPM 54594 b |
|
| 1 | | be not more than those shown in the Commissioners
1980 Extended | 2 | | Term Insurance Table for policies of ordinary insurance and
not | 3 | | more than the Commissioner 1961 Industrial Extended Term | 4 | | Insurance Table
for policies of industrial insurance.
| 5 | | (v) For insurance issued on a substandard basis, the | 6 | | calculation of any
such adjusted premiums and present values | 7 | | may be based on appropriated modifications
of the | 8 | | aforementioned tables.
| 9 | | (vi) Any ordinary mortality tables adopted after 1980 by | 10 | | the National Association
of Insurance Commissioners and | 11 | | approved by regulations promulgated
by the Director for use in | 12 | | determining the minimum nonforfeiture standard
may be | 13 | | substituted for the Commissioners 1980 Standard Ordinary | 14 | | Mortality
Table with or without Ten-Year Select Mortality | 15 | | Factors or for the Commissioners
1980 Extended Term Insurance | 16 | | Table.
| 17 | | (vii) Any industrial mortality tables adopted after 1980 by | 18 | | the National
Association of Insurance Commissioners and | 19 | | approved by regulations promulgated
by the Director for use in | 20 | | determining the minimum nonforfeiture standard
may be | 21 | | substituted for the Commissioners 1961 Standard Industrial | 22 | | Mortality
Table or the Commissioners 1961 Industrial Extended | 23 | | Term Insurance Table.
| 24 | | (i) The nonforfeiture interest rate per annum for any | 25 | | policy issued in
a particular calendar year shall be equal to | 26 | | 125% of the calendar year statutory
valuation interest rate for |
| | | SB2764 | - 18 - | LRB098 19432 RPM 54594 b |
|
| 1 | | such policy, as defined in the Standard Valuation
Law, rounded | 2 | | to the nearest .25%.
| 3 | | (j) Notwithstanding any other provision in this Code to the | 4 | | contrary,
any refiling of nonforfeiture values or their methods | 5 | | of computation for
any previously approved policy form which | 6 | | involves only a change in the
interest rate or mortality table | 7 | | used to compute nonforfeiture values shall
not require refiling | 8 | | of any other provisions of that policy form.
| 9 | | (k) After the effective date of this subsection, any | 10 | | company may, with
respect to any category of insurance, file | 11 | | with the Director a written notice
of its election to comply | 12 | | with the provisions of this subsection after a
specified date | 13 | | before January 1, 1989. That date
shall be the operative date | 14 | | of this subsection for that category of insurance
for such | 15 | | company. If
a company makes no such election, the operative | 16 | | date of this subsection
for that category of insurance issued | 17 | | by such company shall be January 1, 1989.
| 18 | | (5) In the case of any plan of life insurance which | 19 | | provides for future
premium determination, the amounts of which | 20 | | are to be determined by the
insurance company based on then | 21 | | estimates of future experience, or in the
case of any plan of | 22 | | life insurance which is of such a nature that minimum
values | 23 | | cannot be determined by the methods described in subsections | 24 | | (1),
(2), (3), (4), (4a), (4b) or (4c), then
| 25 | | (a) the Director shall satisfy himself that the benefits | 26 | | provided under
such plan are substantially as favorable to |
| | | SB2764 | - 19 - | LRB098 19432 RPM 54594 b |
|
| 1 | | policyholders and insured parties
as the minimum benefits | 2 | | otherwise required by subsections (1), (2), (3),
(4), (4a), | 3 | | (4b) or (4c);
| 4 | | (b) the Director shall satisfy himself that the benefits | 5 | | and the pattern
of premiums of that plan are not such as to | 6 | | mislead prospective policyholders
or insured parties; and
| 7 | | (c) the cash surrender values and paid-up nonforfeiture | 8 | | benefits provided
by such plan shall not be less than the | 9 | | minimum values and benefits computed
by a method consistent | 10 | | with the principles of this Standard Nonforfeiture
law for Life | 11 | | Insurance, as determined by regulations promulgated by the | 12 | | Director.
| 13 | | (6) Any cash surrender value and any paid-up nonforfeiture | 14 | | benefit,
available under the policy in the event of default in | 15 | | a premium payment
due at any time other than on the policy | 16 | | anniversary, shall be
calculated with allowance for the lapse | 17 | | of time and the payment of
fractional premiums beyond the last | 18 | | preceding policy anniversary. All
values referred to in | 19 | | subsections (2), (3), (4), (4a), (4b)
and (4c) may be
| 20 | | calculated upon the assumption that any death benefit is | 21 | | payable at the
end of the policy year of death. The net value | 22 | | of any paid-up additions,
other than paid-up term additions, | 23 | | shall be not less than the amounts
used to provide such | 24 | | additions. Notwithstanding the provisions of
subsection (2), | 25 | | additional benefits payable (i) in the event of death or
| 26 | | dismemberment by accident or accidental means, (ii) in the |
| | | SB2764 | - 20 - | LRB098 19432 RPM 54594 b |
|
| 1 | | event of
total and permanent disability, (iii) as reversionary | 2 | | annuity or
deferred reversionary annuity benefits, (iv) as term | 3 | | insurance benefits
provided by a rider or supplemental policy | 4 | | provision to which, if issued
as a separate policy, this | 5 | | section would not apply, (v) as term
insurance on the life of a | 6 | | child or on the lives of children provided in
a policy on the | 7 | | life of a parent of the child, if such term insurance
expires | 8 | | before the child's age is 26, is uniform in amount after the
| 9 | | child's age is one, and has not become paid-up by reason of the | 10 | | death of
a parent of the child, and (vi) as other policy | 11 | | benefits additional to
life insurance and endowment benefits, | 12 | | and premiums for all such
additional benefits, shall be | 13 | | disregarded in ascertaining cash surrender
values and | 14 | | nonforfeiture benefits required by this section, and no such
| 15 | | additional benefits shall be required to be included in any | 16 | | paid-up
nonforfeiture benefits.
| 17 | | (7) This subsection shall apply to all policies issued on | 18 | | or after January
1, 1987. Any cash surrender value available | 19 | | under the policy in the event
of default in a premium payment | 20 | | due on any policy anniversary shall be in
an amount which does | 21 | | not differ by more than .2% of either the amount of
insurance | 22 | | if the insurance is uniform in amount, or the average amount of
| 23 | | insurance at the beginning of each of the first 10 policy | 24 | | years, from the
sum of (a) the greater of zero and the basic | 25 | | cash value hereinafter specified
and (b) the present value of | 26 | | any existing paid-up additions less the amount
of any |
| | | SB2764 | - 21 - | LRB098 19432 RPM 54594 b |
|
| 1 | | indebtedness to the company under the policy.
| 2 | | The basic cash value equals the present value, on such | 3 | | anniversary, of
the future guaranteed benefits which would have | 4 | | been provided for by the
policy, excluding any existing paid-up | 5 | | additions and before deduction of
any indebtedness to the | 6 | | company, if there had been no default, less the
then present | 7 | | value of the nonforfeiture factors, as hereinafter defined,
| 8 | | corresponding to premiums which would have fallen due on and | 9 | | after such
anniversary. The effects on the basic cash value of | 10 | | supplemental life insurance
or annuity benefits or of family | 11 | | coverage, as described in subsection (2)
or (4), whichever is | 12 | | applicable, shall, however, be the same as are the
effects | 13 | | specified in subsection (2) or (4), whichever is applicable, on
| 14 | | the cash surrender values defined in that subsection.
| 15 | | The nonforfeiture factor for each policy year equals a | 16 | | percentage of the
adjusted premium for the policy year, as | 17 | | defined in subsection (4) or (4c),
whichever is applicable. | 18 | | Except as is required by the next succeeding sentence
of this | 19 | | paragraph, such percentage
| 20 | | (a) shall be the same percentage for each policy year | 21 | | between the second
policy anniversary and the later of (i) the | 22 | | fifth policy anniversary and
(ii) the first policy anniversary | 23 | | at which there is available under the
policy a cash surrender | 24 | | value in an amount, before including any paid-up
additions and | 25 | | before deducting any indebtedness, of at least .2% of either
| 26 | | the amount of insurance, if the insurance is uniform in amount, |
| | | SB2764 | - 22 - | LRB098 19432 RPM 54594 b |
|
| 1 | | or the average
amount of insurance at the beginning of each of | 2 | | the first 10 policy years; and
| 3 | | (b) shall be such that no percentage after the later of the | 4 | | 2 policy anniversaries
specified in the preceding item (a) may | 5 | | apply to fewer than 5 consecutive policy years.
| 6 | | No basic cash value may be less than the value which would | 7 | | be obtained
if the adjusted premiums for the policy, as defined | 8 | | in subsection (4) or
(4c), whichever is applicable, were | 9 | | substituted for the nonforfeiture factors
in the calculation of | 10 | | the basic cash value.
| 11 | | All adjusted premiums and present values referred to in | 12 | | this subsection
shall for a particular policy be calculated on | 13 | | the same mortality and interest
bases as those used in | 14 | | accordance with the other
subsections of this law. The cash | 15 | | surrender values referred to in this
subsection shall include | 16 | | any endowment benefits provided for by the policy.
| 17 | | Any cash surrender value available other than in the event | 18 | | of default in
a premium payment due on a policy anniversary, | 19 | | and the amount of any paid-up
nonforfeiture benefit available | 20 | | under the policy in the event of default
in a premium payment | 21 | | shall be determined in manners consistent with the
manners | 22 | | specified for determining the analogous minimum amounts in | 23 | | subsections
1, 2, 3, 4c, and 6. The amounts of any cash | 24 | | surrender values and of any
paid-up nonforfeiture benefits | 25 | | granted in connection with additional benefits
such as those | 26 | | listed as items (i) through (vi) in subsection (6) shall |
| | | SB2764 | - 23 - | LRB098 19432 RPM 54594 b |
|
| 1 | | conform
with the principles of this subsection (7).
| 2 | | (8) This Section shall not apply to any of the following:
| 3 | | (a) reinsurance,
| 4 | | (b) group insurance,
| 5 | | (c) a pure endowment,
| 6 | | (d) an annuity or reversionary annuity contract,
| 7 | | (e) a term policy of uniform amount, which provides no | 8 | | guaranteed nonforfeiture
or endowment benefits, or renewal | 9 | | thereof, of 20 years or
less expiring before age 71, for which | 10 | | uniform premiums are payable
during the entire term of the | 11 | | policy,
| 12 | | (f) a term policy of
decreasing amount, which provides no | 13 | | guaranteed nonforfeiture or endowment
benefits, on which each | 14 | | adjusted premium, calculated as
specified in subsections (4), | 15 | | (4a), (4b) and (4c), is less
than the adjusted
premium so | 16 | | calculated, on a term policy of uniform
amount, or renewal | 17 | | thereof, which provides no guaranteed nonforfeiture or
| 18 | | endowment benefits, issued at the same
age and for the same | 19 | | initial amount of insurance and for a term of 20
years or less | 20 | | expiring before age 71, for which uniform premiums are payable
| 21 | | during the entire term of the policy,
| 22 | | (g) a policy, which provides no guaranteed nonforfeiture or | 23 | | endowment
benefits, for which no cash surrender value, if any, | 24 | | or present value of
any paid-up nonforfeiture benefit, at the | 25 | | beginning of any policy year,
calculated as specified in | 26 | | subsections (2), (3), (4), (4a), (4b) and (4c),
exceeds 2.5% of |
| | | SB2764 | - 24 - | LRB098 19432 RPM 54594 b |
|
| 1 | | the amount of insurance at the beginning of the same policy | 2 | | year,
| 3 | | (h) any policy
which shall be delivered outside this State | 4 | | through an agent or other
representative of the company issuing | 5 | | the policy.
| 6 | | For purposes of determining the applicability of this | 7 | | Section, the age
of expiry for a joint term life insurance | 8 | | policy shall be the age of expiry
of the oldest life.
| 9 | | (Source: P.A. 83-1465.)
|
|