31A-22-408 - Standard Nonforfeiture Law for Life Insurance.
31A-22-408. Standard Nonforfeiture Law for Life Insurance.
(1) This section is known as the "Standard Nonforfeiture Law for Life Insurance." It doesnot apply to group life insurance.
(2) In the case of policies issued on or after July 1, 1961, no policy of life insurance,except as stated in Subsection (8), may be delivered or issued for delivery in this state unless itcontains in substance the following provisions, or corresponding provisions which in the opinionof the commissioner are at least as favorable to the defaulting or surrendering policyholder as arethe minimum requirements hereinafter specified, and are essentially in compliance withSubsection (8):
(a) That, in the event of default in any premium payment, after premiums have been paidfor at least one full year the company will grant, upon proper request not later than 60 days afterthe due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in thepolicy, effective as of such due date, of such amount as is specified in this section. In lieu of thatstipulated paid-up nonforfeiture benefit, the company may substitute, upon proper request notlater than 60 days after the due date of the premium in default, an actuarially equivalentalternative paid-up nonforfeiture benefit which provides a greater amount or longer period ofdeath benefits or, if applicable, a greater amount or earlier payment of endowment benefits.
(b) That, upon surrender of the policy within 60 days after the due date of any premiumpayment in default after premiums have been paid for at least three full years in the case ofordinary insurance or five full years in the case of industrial insurance, the company will pay, inlieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as is specified inthis section.
(c) That a specified paid-up nonforfeiture benefit shall become effective as specified inthe policy unless the person entitled to make such election elects another available option notlater than 60 days after the due date of the premium in default.
(d) That, if the policy shall have been paid by the completion of all premium payments orif it is continued under any paid-up nonforfeiture benefit which became effective on or after thethird policy anniversary in the case of ordinary insurance or the fifth policy anniversary in thecase of industrial insurance, the company will pay upon surrender of the policy within 30 daysafter any policy anniversary, a cash surrender value in the amount specified in this section.
(e) In the case of policies which cause, on a basis guaranteed in the policy, unscheduledchanges in benefits or premiums, or which provide an option for changes in benefits or premiumsother than a change to a new policy, a statement of the mortality table, interest rate, and methodused in calculating cash surrender values and the paid-up nonforfeiture benefits available underthe policy. In the case of all other policies, a statement of the mortality table and interest rateused in calculating the cash surrender values and the paid-up nonforfeiture benefit, if any,available under the policy on each policy anniversary either during the first 20 policy years orduring the term of the policy, whichever is shorter, such values and benefits to be calculated uponthe assumption that there are no dividends or paid-up additions credited to the policy and thatthere is no indebtedness to the company on the policy.
(f) A statement that the cash surrender values and the paid-up nonforfeiture benefitsavailable under the policy are not less than the minimum values and benefits required by orpursuant to the insurance law of the state in which the policy is delivered; an explanation of themanner in which the cash surrender values and the paid-up nonforfeiture benefits are altered bythe existence of any paid-up additions credited to the policy or any indebtedness to the company
on the policy; if a detailed statement of the method of computation of the values and benefitsshown in the policy is not stated therein, a statement that such method of computation has beenfiled with the insurance supervisory official of the state in which the policy is delivered; and astatement of the method to be used in calculating the cash surrender value and paid-upnonforfeiture benefit available under the policy on any policy anniversary beyond the lastanniversary for which such values and benefits are consecutively shown in the policy.
Any of the foregoing provisions 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 the right to defer the payment of any cash surrender value fora period of six months after demand therefor with surrender of the policy with the consent of thecommissioner; provided, however, that the policy shall remain in full force and effect until theinsurer has made the payment.
(3) Any cash surrender value available under the policy in the event of default in apremium payment due on any policy anniversary, whether or not required by Subsection (2),shall be an amount not less than the excess, if any, of the present value, on such anniversary, ofthe future guaranteed benefits which would have been provided for by the policy, including anyexisting paid-up additions, if there had been no default, over the sum of: (a) the then presentvalue of the adjusted premiums as defined in Subsections (5) and (6), corresponding to premiumswhich would have fallen due on and after such anniversary, and (b) the amount of anyindebtedness to the company on the policy.
Provided, however, that for any policy issued on or after the operative date of Subsection(6)(d) as defined therein, which provides supplemental life insurance or annuity benefits at theoption of the insured and for an identifiable additional premium by rider or supplemental policyprovision, the cash surrender value referred to in the first paragraph of this subsection shall be anamount not less than the sum of the cash surrender value as defined in such paragraph for anotherwise similar policy issued at the same age without such rider or supplemental policyprovision and the cash surrender value as defined in such paragraph for a policy which providesonly the benefits otherwise provided by such rider or supplemental policy provision.
Provided, further, that for any family policy issued on or after the operative date ofSubsection (6)(d) as defined therein, which defines a primary insured and provides terminsurance on the life of the spouse of the primary insured expiring before the spouse's age 71, thecash surrender value referred to in the first paragraph of this subsection shall be an amount notless than the sum of the cash surrender value as defined in such paragraph for an otherwisesimilar policy issued at the same age without such term insurance on the life of the spouse andthe cash surrender value as defined in such paragraph for a policy which provides only thebenefits otherwise provided by such term insurance on the life of the spouse. Any cashsurrender value available within 30 days after any policy anniversary under any policy paid-up bycompletion of all premium payments or any policy continued under any paid-up nonforfeiturebenefit, whether or not required by Subsection (2) shall be an amount not less than the presentvalue, on such anniversary, of the future guaranteed benefits provided for by the policy, includingany existing paid-up additions, decreased by any indebtedness to the company on the policy.
(4) Any paid-up nonforfeiture benefit available under the policy in the event of default ina premium payment due on any policy anniversary shall be such that its present value as of suchanniversary shall be at least equal to the cash surrender value then provided for by the policy or,if none is provided for, that cash surrender value which would have been required by this section
in the absence of the condition that premiums shall have been paid for at least a specified period.
(5) (a) This Subsection (5)(a) does not apply to policies issued on or after the operativedate of Subsection (6)(d) as defined therein. Except as provided in Subsection (5)(c), theadjusted premiums for any policy shall be calculated on an annual basis and shall be suchuniform percentage of the respective premiums specified in the policy for each policy year,excluding any extra premiums charged because of impairments or special hazards, that thepresent value, at the date of issue of the policy, of all such adjusted premiums shall be equal tothe sum of: (i) the then present value of the future guaranteed benefits provided for by thepolicy; (ii) 2% of the amount of insurance, if the insurance be uniform in amount, or of theequivalent uniform amount if the amount of insurance varies with duration of the policy; (iii)40% of the adjusted premium for the first policy year; and (iv) 25% of either the adjustedpremium for the first policy year or the adjusted premium for a whole life policy of the sameuniform or equivalent uniform amount with uniform premiums for the whole of life issued at thesame age for the same amount of insurance, whichever is less. Provided, however, that inapplying the percentages specified in Subsections (5)(a)(iii) and (iv), no adjusted premium shallbe considered to exceed 4% of the amount of insurance or uniform amount equivalent thereto. The date of issue of a policy for the purpose of this section shall be the date as of which the ratedage of the insured is determined.
(b) In the case of a policy providing an amount of insurance varying with duration of thepolicy, the equivalent uniform amount thereof for the purpose of this section shall be consideredto be the uniform amount of insurance provided by an otherwise similar policy, containing thesame endowment benefit or benefits, if any, issued at the same age and for the same term, theamount of which does not vary with duration and the benefits under which have the same presentvalue at the date of issue as the benefits under the policy; provided, however, that in the case of apolicy providing a varying amount of insurance issued on the life of a child under age 10, theequivalent uniform amount may be computed as though the amount of insurance provided by thepolicy prior to the attainment of age 10 were the amount provided by such policy at age 10.
(c) The adjusted premiums for any policy providing term insurance benefits by rider orsupplemental policy provision shall be equal to: (i) the adjusted premiums for an otherwisesimilar policy issued at the same age without such term insurance benefits, increased, during theperiod for which premiums for such term insurance benefits are payable, by (ii) the adjustedpremiums for such term insurance, the foregoing items (i) and (ii) of this paragraph beingcalculated separately and as specified in Subsections (5)(a) and (b) except that, for the purposesof (ii), (iii), and (iv) of Subsection (5)(a), the amount of insurance or equivalent uniform amountof insurance used in calculation of the adjusted premiums referred to in (ii) of this paragraphshall be equal to the excess of the corresponding amount determined for the entire policy over theamount used in the calculation of the adjusted premiums in (i) of this paragraph.
(d) Except as otherwise provided in Subsection (6), all adjusted premiums and presentvalues referred to in this section shall for all policies of ordinary insurance be calculated on thebasis of the Commissioner's 1941 Standard Ordinary Mortality Table, provided that for anycategory of ordinary insurance issued on female risks, adjusted premiums and present values maybe calculated according to an age not more than three years younger than the actual age of theinsured and such calculations for all policies of industrial insurance shall be made on the basis ofthe 1941 Standard Industrial Mortality Table. All calculations shall be made on the basis of therate of interest, not exceeding 3-1/2% per annum, specified in the policy for calculating cash
surrender values and paid-up nonforfeiture benefits. Provided, however, that in calculating thepresent value of any paid-up term insurance with accompanying pure endowment, if any, offeredas a nonforfeiture benefit, the rates of mortality assumed may be not more than 130% of the ratesof mortality according to such applicable table. Provided, further, that for insurance issued on asubstandard basis, 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 and approved by thecommissioner.
(6) (a) This Subsection (6)(a) does not apply to ordinary policies issued on or after theoperative date of Subsection (6)(d) as defined therein. In the case of ordinary policies issued onor after the operative date of Subsection (6)(a) as defined in Subsection (6)(b), all adjustedpremiums and present values referred to in this section shall be calculated on the basis of theCommissioner's 1958 Standard Ordinary Mortality Table and the rate of interest as specified inthe policy for calculating cash surrender values and paid-up nonforfeiture benefits, provided thatsuch rate of interest shall not exceed 3-1/2% per annum for policies issued before June 1, 1973,4% per annum for policies issued on or after May 31, 1973, and before April 2, 1980, and therate of interest shall not exceed 5-1/2% per annum for policies issued after April 2, 1980, exceptthat for any single premium whole life or endowment insurance policy a rate of interest notexceeding 6-1/2% per annum may be used, and provided that for any category of ordinaryinsurance issued on female risks, adjusted premiums and present values may be calculatedaccording to an age not more than six years younger than the actual age of the insured. Provided, however, that in calculating the present value of any paid-up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortalityassumed may be not more than those shown in the Commissioner's 1958 Extended TermInsurance Table. Provided, further, that for insurance issued on a substandard basis, thecalculation of any such adjusted premiums and present values may be based on such other tableof mortality as may be specified by the company and approved by the commissioner.
(b) Any company may file with the commissioner a written notice of its election tocomply with the provisions of Subsection (6)(a) after a specified date before January 1, 1966. After filing such notice, then upon such specified date, which is the operative date of Subsection(6)(a) for such company, this Subsection (6)(a) shall become operative with respect to theordinary policies thereafter issued by such company. If a company makes no such election, theoperative date of Subsection (6)(a) for such company is January 1, 1966.
(c) This Subsection (6)(c) does not apply to industrial policies issued after the operativedate of Subsection (6)(d) as defined therein. In the case of industrial policies issued on or afterthe operative date of this Subsection (6)(c) as defined herein, all adjusted premiums and presentvalues referred to in this section shall be calculated on the basis of the Commissioner's 1961Standard Industrial Mortality Table and the rate of interest specified in the policy for calculatingcash surrender values and paid-up nonforfeiture benefits, provided that such rate of interest shallnot exceed 3-1/2% per annum for policies issued before June 1, 1973, 4% per annum for policiesissued after May 31, 1973, and before April 2, 1980, and 5-1/2% per annum for policies issuedafter April 2, 1980, except that for any single premium whole life or endowment insurance policyissued after April 2, 1980, a rate of interest not exceeding 6-1/2% per annum may be used. Provided, however, that in calculating the present value of any paid-up term insurance withaccompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortalityassumed may be not more than those shown in the Commissioner's 1961 Industrial Extended
Term Insurance Table. Provided, further, that for insurance issued on a substandard basis, thecalculation of any such adjusted premiums and present values may be based on such other tableof mortality as may be specified by the company and approved by the commissioner.
Any company may file with the commissioner a written notice of its election to complywith the provisions of this Subsection (6)(c) after a specified date before January 1, 1968. Afterfiling such notice, then upon that specified date, which is the operative date of this Subsection (6)(c) for such company, this Subsection (6)(c) shall become operative with respect to the industrialpolicies thereafter issued by such company. If a company makes no such election, the operativedate of this paragraph (c) for such company shall be January 1, 1968.
(d) (i) This Subsection (6)(d) applies to all policies issued on or after the operative dateof this subsection as defined herein. Except as provided in Subsection (6)(d)(vii), the adjustedpremiums for any policy shall be calculated on an annual basis and shall be such uniformpercentage of the respective premiums specified in the policy for each policy year, excludingamounts payable as extra premiums to cover impairments or special hazards and also excludingany uniform annual contract charge or policy fee specified in the policy in a statement of themethod to be used in calculating the cash surrender values and paid-up nonforfeiture benefits,that the present value, at the date of issue of policy, of all adjusted premiums shall be equal to thesum of: (A) the then present value of the future guaranteed benefits provided for by the policy;(B) 1% of either the amount of insurance, if the insurance be uniform in amount, or the averageamount of insurance at the beginning of each of the first 10 policy years; and (C) 125% of thenonforfeiture net level premium as hereinafter defined. Provided, however, that in applying thepercentage specified in (C), no nonforfeiture net level premium shall be considered to exceed 4%of either the amount of insurance, if the insurance be uniform in amount, or the average amountof insurance at the beginning of each of the first 10 policy years. The date of issue of a policy forthe purpose of this subsection shall be the date as of which the rated age of the insured isdetermined.
(ii) The nonforfeiture net level premium shall be equal to the present value, at the date ofissue of the policy, of the guaranteed benefits provided for by the policy divided by the presentvalue, at the date of issue of the policy, of an annuity of one per annum payable on the date ofissue of the policy and on each anniversary of such policy on which a premium falls due.
(iii) In the case of policies which cause on a basis guaranteed in the policy unscheduledchanges in benefits or premiums, or which provide an option for changes in benefits or premiumsother than change to a new policy, the adjusted premiums and present values shall initially becalculated on the assumption that future benefits and premiums do not change from thosestipulated at the date of issue of the policy. At the time of any such change in the benefits orpremiums the future adjusted premiums, nonforfeiture net level premiums, and present valuesshall be recalculated on the assumption that future benefits and premiums do not change fromthose stipulated by the policy immediately after the change.
(iv) Except as otherwise provided in Subsection (6)(d)(vii), the recalculated futureadjusted premiums for any such policy shall be such uniform percentage of the respective futurepremiums specified in the policy for each policy year, excluding amounts specified in the policyfor each policy year, excluding amounts payable as extra premiums to cover impairments andspecial hazards, and also excluding any uniform annual contract charge or policy fee specified inthe policy in a statement of the method to be used in calculating the cash surrender values andpaid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined
benefits or premiums, of all such future adjusted premiums shall be equal to the excess of (A) thesum of: (I) the then present value of the then future guaranteed benefits provided for by thepolicy and (II) the additional expense allowance, if any, over (B) the then cash surrender value, ifany, or present value of any paid-up nonforfeiture benefit under the policy.
(v) The additional expense allowance, at the time of the change to the newly definedbenefits or premiums, shall be the sum of: (A) 1% of the excess, if positive, of the averageamount of insurance at the beginning of each of the first 10 policy years subsequent to the changeover the average amount of insurance prior to the change at the beginning of each of the first 10policy years subsequent to the time of the most recent previous change, or, if there has been noprevious change, the date of issue of the policy; and (B) 125% of the increase, if positive, in thenonforfeiture net level premium.
(vi) The recalculated nonforfeiture net level premium shall be equal to the result obtainedby dividing (A) by (B) where
(A) equals the sum of:
(I) the nonforfeiture net level premium applicable prior to the change times the presentvalue of an annuity of one per annum payable on each anniversary of the policy on or subsequentto the date of the change on which a premium would have fallen due had the change notoccurred; and
(II) the present value of the increase in future guaranteed benefits provided for by thepolicy; and
(B) equals the present value of an annuity of one per annum payable on each anniversaryof the policy on or subsequent to the date of change on which a premium falls due.
(vii) Notwithstanding any other provision of this Subsection (6)(d) to the contrary, in thecase of a policy issued on a substandard basis which provides reduced graded amounts ofinsurance so that, in each policy year, such policy has the same tabular mortality cost as anotherwise similar policy issued on the standard basis which provides higher uniform amounts ofinsurance, adjusted premiums and present values for such substandard policy may be calculatedas if it were issued to provide such higher uniform amounts of insurance on the standard basis.
(viii) All adjusted premiums and present values referred to in this section shall for allpolicies of ordinary insurance be calculated on the basis of: (A) the Commissioner's 1980Standard Ordinary Mortality Table; or (B) at the election of the company for any one or morespecified plans of life insurance, the Commissioner's 1980 Standard Ordinary Mortality Tablewith Ten-Year Select Mortality Factors; shall for all policies of industrial insurance be calculatedon the basis of the Commissioner's 1961 Standard Industrial Mortality Table; and shall for allpolicies issued in a particular calendar year be calculated on the basis of a rate of interest notexceeding the nonforfeiture interest rate as defined in this subsection, for policies issued in thatcalendar year. Provided, however, that:
(I) At the option of the company, calculations for all policies issued in a particularcalendar year may be made on the basis of a rate of interest not exceeding the nonforfeitureinterest rate, as defined in this subsection, for policies issued in the immediately precedingcalendar year.
(II) Under any paid-up nonforfeiture benefit, including any paid-up dividend additions,any cash surrender value available, whether or not required by Subsection (2), shall be calculatedon the basis of the mortality table and rate of interest used in determining the amount of suchpaid-up nonforfeiture benefit and paid-up dividend additions, if any.
(III) A company may calculate the amount of any guaranteed paid-up nonforfeiturebenefit, including paid-up additions under the policy, on the basis of an interest rate no lowerthan that specified in the policy for calculating cash surrender values.
(IV) In calculating the present value of any paid-up term insurance with accompanyingpure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may benot more than those shown in the Commissioner's 1980 Extended Term Insurance Table forpolicies of ordinary insurance and not more than the Commissioner's 1961 Industrial ExtendedTerm Insurance Table for policies of industrial insurance.
(V) For insurance issued on a substandard basis, the calculation of any such adjustedpremiums and present values may be based on appropriate modifications of the aforementionedtables.
(VI) Any ordinary mortality tables, adopted after 1980 by the National Association ofInsurance Commissioners, that are approved by rules adopted by the commissioner for use indetermining the minimum nonforfeiture standard, may be substituted for the Commissioner's1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or forthe Commissioner's 1980 Extended Term Insurance Table.
(VII) Any industrial mortality tables, adopted after 1980 by the National Association ofInsurance Commissioners, that are approved by rules adopted by the commissioner for use indetermining the minimum nonforfeiture standard may be substituted for the Commissioner's1961 Industrial Extended Term Insurance Table.
(ix) The nonforfeiture interest rate per annum for any policy issued in a particularcalendar year shall be equal to 125% of the calendar year statutory valuation interest rate for suchpolicy as defined in the Standard Valuation Law, rounded to the nearest 1/4 of 1%.
(x) Notwithstanding any other provision in this title to the contrary, any refiling ofnonforfeiture values or their methods of computation for any previously approved policy formwhich involves only a change in the interest rate or mortality table used to compute nonforfeiturevalues does not require refiling of any other provisions of that policy form.
(xi) After the effective date of this Subsection (6)(d), any company may, at any timebefore January 1, 1989, file with the commissioner a written notice of its election to comply withthe provisions of this subsection with regard to any number of plans of insurance after a specifieddate before January 1, 1989, which specified date shall be the operative date of this Subsection(6)(d) for the plan or plans, but if a company elects to make the provisions of this subsectionoperative before January 1, 1989, for fewer than all plans, the company must comply with rulesadopted by the commissioner. There is no limit to the number of times this election may bemade. If the company makes no such election, the operative date of this subsection for suchcompany shall be January 1, 1989.
(7) In the case of any plan of life insurance which provides for future premiumdetermination, the amounts of which are to be determined by the insurance company based on theestimates of future experience, or in the case of any plan of life insurance which is of such naturethat minimum values cannot be determined by the methods described in Subsection (2), (3), (4),(5), (6)(a), (6)(b), (6)(c), or (6)(d) herein, then:
(a) the commissioner must be satisfied that the benefits provided under the plan aresubstantially as favorable to policyholders and insureds as the minimum benefits otherwiserequired by Subsection (2), (3), (4), (5), (6)(a), (6)(b), (6)(c), or (6)(d);
(b) the commissioner must be satisfied that the benefits and the pattern of premiums of
that plan are not such as to mislead prospective policyholders or insureds; and
(c) the cash surrender values and paid-up nonforfeiture benefits provided by such planmust not be less than the minimum values and benefits required for the plan computed by amethod consistent with the principles of this Standard Nonforfeiture Law for Life Insurance, asdetermined by rules adopted by the commissioner.
(8) Any cash surrender value and any paid-up nonforfeiture benefit, available under thepolicy in the event of default in a premium payment due at any time other than on the policyanniversary, shall be calculated with allowance for the lapse of time and the payment offractional premiums beyond the last preceding policy anniversary. All values referred to inSubsections (3), (4), (5), and (6) of this section may be calculated upon the assumption that anydeath benefit is payable at the end of the policy year of death. The net value of any paid-upadditions, other than paid-up term additions, may not be less than the amounts used to providesuch additions. Notwithstanding the provisions of Subsection (3), additional benefits payable: (a) in the event of death or dismemberment by accident or accidental means, (b) in the event oftotal and permanent disability, (c) as reversionary annuity or deferred reversionary annuitybenefits, (d) as term insurance benefits provided by a rider or supplemental policy provision towhich, if issued as a separate policy, this section would not apply, (e) as term insurance on thelife of a child or on the lives of children provided in a policy on the life of a parent of the child, ifsuch term insurance expires before the child's age is 26, if uniform in amount after the child's ageis one, and has not become paid-up by reason of the death of a parent of the child, and (f) as otherpolicy benefits additional to life insurance endowment benefits, and premiums for all suchadditional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiturebenefits required by this section, and no such additional benefits shall be required to be includedin any paid-up nonforfeiture benefits.
(9) This subsection, in addition to all other applicable subsections of this section, appliesto all policies issued on or after January 1, 1985. Any cash surrender value available under thepolicy in the event of default in a premium payment due on any policy anniversary shall be in anamount which does not differ by more than 2/10 of 1% of either the amount of insurance, if theinsurance be uniform in amount, or the average amount of insurance at the beginning of each ofthe first 10 policy years, from the sum of: (a) the greater of zero and the basic cash valuehereinafter specified, and (b) the present value of any existing paid-up additions less the amountof any indebtedness to the company under the policy.
The basic cash value shall be equal to the present value, on such anniversary of the futureguaranteed benefits which would have been provided for by the policy, excluding any existingpaid-up additions and before deduction of any indebtedness to the company, if there had been nodefault, less the then present value of the nonforfeiture factors, as hereinafter defined,corresponding to premiums which would have fallen due on and after such anniversary. Provided, however, that the effects on the basic cash value of supplemental life insurance orannuity benefits or of family coverage, as described in Subsection (3) or (5), whichever isapplicable, shall be the same as are the effects specified in Subsection (3) or (5), whichever isapplicable, on the cash surrender values defined in that subsection.
The nonforfeiture factor for each policy year shall be an amount equal to a percentage ofthe adjusted premium for the policy year, as defined in Subsection (5) or (6)(d), whichever isapplicable. Except as is required by the next succeeding sentence of this paragraph, suchpercentage:
(a) must be the same percentage for each policy year between the second policyanniversary and the later of: (i) the fifth policy anniversary and (ii) the first policy anniversary atwhich there is available under the policy a cash surrender value in an amount, before includingany paid-up additions and before deducting any indebtedness, of at least 2/10 of 1% of either theamount of insurance, if the insurance be uniform in amount, or the average amount of insuranceat the beginning of each of the first 10 policy years; and
(b) must be such that no percentage after the later of the two policy anniversariesspecified in Subsection (9)(a) may apply to fewer than five consecutive policy years.
Provided, that no basic cash value may be less than the value which would be obtained ifthe adjusted premiums for the policy, as defined in Subsection (5) or Subsection (6)(d),whichever is applicable, were substituted for the nonforfeiture factors in the calculation of thebasic value.
All adjusted premiums and present values referred to in this Subsection (9) shall for aparticular policy be calculated on the same mortality and interest bases as are used indemonstrating the policy's compliance with the other subsections of this law. The cashsurrender values referred to in this subsection shall include any endowment benefits provided forby the policy.
Any cash surrender value available other than in the event of default in a premiumpayment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefitavailable under the policy in the event of default in a premium payment shall be determined inmanners consistent with the manners specified for determining the analogous minimum amountsin Subsections (2), (3), (4), (5), (6), and (8). The amounts of any cash surrender values and ofany paid-up nonforfeiture benefits granted in connection with additional benefits such as thoselisted as Subsections (8)(a) through (f) shall conform with the principles of this Subsection (9).
(10) This section does not apply to any of the following:
(a) reinsurance;
(b) group insurance;
(c) pure endowment;
(d) an annuity or reversionary annuity contract;
(e) a term policy of uniform amount, which provides no guaranteed nonforfeiture orendowment benefits, or renewal thereof, of 20 years or less expiring before age 71, for whichuniform premiums are payable during the entire term of the policy;
(f) a term policy of decreasing amount, which provides no guaranteed nonforfeiture orendowment benefits, on which each adjusted premium, calculated as specified in Subsections (5)and (6), is less than the adjusted premium so calculated, on a term policy of uniform amount, orrenewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued atthe same age and for the same initial amount of insurance, and for a term of 20 years or lessexpiring before age 71, for which uniform premiums are payable during the entire term of thepolicy;
(g) a policy, which provides no guaranteed nonforfeiture or endowment benefits, forwhich no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, atthe beginning of any policy year, calculated as specified in Subsections (3), (4), (5), and (6)exceeds 2-1/2% of the amount of insurance at the beginning of the same policy year; or
(h) a policy which shall be delivered outside this state through an agent or otherrepresentative of the company issuing the policy.
For purposes of determining the applicability of this section, the age of expiry for a jointterm insurance policy shall be the age of expiry of the oldest life.
(11) The commissioner may adopt rules interpreting, describing, and clarifying theapplication of this nonforfeiture law to any form of life insurance for which the interpretation,description, or clarification is deemed necessary by the commissioner, including but not limitedto, unusual and new forms of life insurance.
Amended by Chapter 91, 1987 General Session