§ 27-62-6 - Standards for basic illustrations.
SECTION 27-62-6
§ 27-62-6 Standards for basicillustrations. – (a) Format. A basic illustration shall conform to the followingrequirements:
(1) The illustration shall be labeled with the date on whichit 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 theillustration (e.g., the fourth page of a seven (7) page illustration shall belabeled "page 4 of 7 pages").
(3) The assumed dates of payment receipt and benefit pay-outwithin a policy year shall be clearly identified.
(4) If the age of the proposed insured is shown as acomponent of the tabular detail, it shall be issue age plus the numbers ofyears the policy is assumed to have been in force.
(5) The assumed payments on which the illustrated benefitsand 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 uponsurrender, if any, for the illustrated premium outlay or contract premium shallbe shown and clearly labeled guaranteed.
(7) If the illustration shows any non-guaranteed elements,they cannot be based on a scale more favorable to the policy owner than theinsurer's illustrated scale at any duration. These elements shall be clearlylabeled non-guaranteed.
(8) The guaranteed elements, if any, shall be shown beforecorresponding non-guaranteed elements and shall be specifically referred to onany page of an illustration that shows or described only the non-guaranteedelements (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 beingillustrated and shown in close proximity to the corresponding value availableupon surrender.
(10) The value available upon surrender shall be identifiedby the name this value is given in the policy being illustrated and shall bethe amount available to the policy owner in a lump sum after deduction ofsurrender charges, policy loans and policy loan interest, as applicable.
(11) Illustrations may show policy benefits and values ingraphic or chart form in addition to the tabular form.
(12) Any illustration of non-guaranteed elements shall beaccompanied by a statement indicating that:
(i) The benefits and values are not guaranteed;
(ii) The assumptions on which they are based are subject tochange by the insurer; and
(iii) Actual results may be more or less favorable.
(13) If the illustration shows that the premium payer mayhave the option to allow policy charges to be paid using non-guaranteed values,the illustration must clearly disclose that a charge continues to be requiredand that, depending on actual results, the premium payer may need to continueor resume premium outlays. Similar disclosure shall be made for premium outlayof lesser amounts or shorter durations than the contract premium. If a contractpremium is due, the premium outlay display shall not be left blank or show zerounless accompanied by an asterisk or similar mark to draw attention to the factthat the policy is not paid up.
(14) If the applicant plans to use dividends or policyvalues, guaranteed or non-guaranteed, to pay all or a portion of the contractpremium or policy charges, or for any other purpose, the illustration mayreflect those plans and the impact on future policy benefits and values.
(b) Narrative Summary. A basic illustration shallinclude 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 contractpremium, as applicable, for the policy. For a policy that does not requirepayment of a specific contract premium, the illustration shall show the premiumoutlay that must be paid to guarantee coverage for the term of the contract,subject to maximum premiums allowable to qualify as a life insurance policyunder the applicable provisions of the Internal Revenue Code, Title 26 of theU.S. Code;
(3) A brief description of any policy features, riders oroptions, guaranteed or non-guaranteed, shown in the basic illustration and theimpact they may have on the benefits and values of the policy;
(4) Identification and a brief definition of column headingsand key terms used in the illustration; and
(5) A statement containing in substance the following: "Thisillustration assumes that the currently illustrated non-guarantee elements willcontinue unchanged for all years shown. This is not likely to occur, and actualresults may be more or less favorable than those shown."
(c) Numeric Summary. (1) Following thenarrative summary, a basic illustration shall include a numeric summary of thedeath benefits and values and the premium outlay and contract premium, asapplicable. For a policy that provides for a contract premium, the guaranteeddeath benefits and values shall be based on the contract premium. This summaryshall be shown for at least policy years five (5), ten (10) and twenty (20) andat age seventy (70), if applicable, on the three (3) bases shown below. Formultiple life policies the summary shall show policy years five (5), ten (10),twenty (20) and thirty (30).
(i) Policy guarantees;
(ii) Insurer's illustrated scale;
(iii) Insurer's illustrated scale used but with thenon-guaranteed elements reduced as follows:
(A) Dividends at fifty percent (50%) of the dividendscontained in the illustrated scale used;
(B) Non-guaranteed credited interest at rates that are theaverage of the guaranteed rates and the rates contained in the illustratedscale used; and
(C) All non-guaranteed charges, including, but not limitedto, term insurance charges, mortality and expense charges, at rates that arethe average of the guaranteed rates and the rates contained in the illustratedscale used.
(2) In addition, if coverage would cease prior to policymaturity or age one hundred (100), the year in which coverage ceases shall beidentified for each of the three (3) bases.
(d) Statements. Statements substantially similar tothe following shall be included on the same page as the numeric summary andsigned by the applicant, or the policy owner in the case of an illustrationprovided at time of delivery, as required in this chapter.
(1) A statement to be signed and dated by the applicant orpolicy owner reading as follows: "I have received a copy of this illustrationand understand that any non-guaranteed elements illustrated are subject tochange and could be either higher or lower. The agent has told me they are notguaranteed."
(2) A statement to be signed and dated by the insuranceproducer or other authorized representative of the insurer reading as follows:"I certify that this illustration has been presented to the applicant and thatI have explained that any non-guaranteed elements illustrated are subject tochange. I have made no statements that are inconsistent with the illustration."
(e) Tabular detail. (1) A basicillustration shall include the following for at least each policy year from oneto ten (10) and for every fifth policy year thereafter ending at age onehundred (100), policy maturity or final expiration; and except for terminsurance beyond the 20th year, for any year in which the premium outlay andcontract premium, if applicable, is to change:
(i) The premium outlay and mode the applicant plans to payand the contract premium, as applicable;
(ii) The corresponding guaranteed death benefit, as providedin the policy; and
(iii) The corresponding guaranteed value available uponsurrender, as provided in the policy.
(2) For a policy that provides for a contract premium, theguaranteed death benefit and value available upon surrender shall correspond tothe contract premium.
(3) Non-guaranteed elements may be shown if described in thecontract. In the case of an illustration for a policy on which the insurerintends to credit terminal dividends, they may be shown if the insurer'scurrent practice is to pay terminal dividends. If any non-guaranteed elementsare shown they must be shown at the same durations as the correspondingguaranteed elements, if any. If no guaranteed benefit or value is available atany duration for which a non-guaranteed benefit or value is shown, a zero shallbe displayed in the guaranteed column.