Insurance

The Standard Nonforfeiture Law for Life Insurance

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§ 27-4.3-8. Consistency of progression of cash surrender values with increasing policy duration.**

(a) This section, in addition to all other applicable sections of this chapter, shall apply to all policies issued on or after January 1, 1994. Any cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary shall be in an amount which does not differ by more than two tenths of one percent (.2%) of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years, from the sum of: (1) the greater of zero (0) and the basic cash value specified in subsection (b), and (2) the present value of any existing paid up additions less the amount of any indebtedness to the insurance company under the policy.

(b) The basic cash value shall be equal to the present value, on the anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the insurance company, if there had been no default, less the then present value of the nonforfeiture factors, as defined in this section, corresponding to premiums which would have fallen due on and after the anniversary; provided, that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in § 27-4.3-3 or 27-4.3-5, whichever is applicable, shall be the same as are the effects specified in § 27-4.3-3 or 27-4.3-5, whichever is applicable, on the cash surrender values defined in that section.

(c) The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in § 27-4.3-5. Except as is required in this section, the percentage:

(1) Must be the same percentage for each policy year between the second policy anniversary and the later of: (i) the fifth policy anniversary, and (ii) the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two tenths of one percent (.2%) of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten (10) policy years; and

(2) Must be such that no percentage after the later of the two policy anniversaries specified in subdivision (c)(1) may apply to fewer than five (5) consecutive policy years.

(d) No basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in § 27-4.3-5, were substituted for the nonforfeiture factors in the calculation of the basic cash value.

(e) All adjusted premiums and present values referred to in this section shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with the other sections of this chapter. The cash surrender values referred to in this section shall include any endowment benefits provided for by the policy.

(f) Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid up nonforfeiture benefit available under the policy in the event of default in a premium payment, shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in §§ 27-4.3-2 – 27-4.3-5 and 27-4.3-7. The amounts of any cash surrender values and of any paid up nonforfeiture benefits granted in connection with additional benefits such as those listed subdivisions (1) – (6) of § 27-4.3-7 shall conform with the principles of this section.

(P.L. 1993, ch. 180, § 1; P.L. 2002, ch. 292, § 14.)