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Illinois Compiled Statutes
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INSURANCE (215 ILCS 5/) Illinois Insurance Code. 215 ILCS 5/229.1
(215 ILCS 5/229.1) (from Ch. 73, par. 841.1)
Sec. 229.1.
Non-forfeiture benefits and cash surrender values in policies issued prior
to the operative date of section 229.2.
(1) This subsection shall apply only to policies of life insurance
(other than Industrial life insurance) issued prior to the operative date
of section 229.2 (the Standard Non-forfeiture Law.)
The non-forfeiture benefit referred to in clause (g) of section 224
shall be available to the insured in event of default in premium payments,
after premiums shall have been paid for three years, and shall be a
stipulated form of insurance, effective from the due date of the defaulted
premium, the net value of which shall not be less than the reserve at the
date of default on the policy and on dividend additions thereto, if any,
exclusive of the reserve on account of total and permanent disability and
additional accidental death benefits (the policy to specify the mortality
table, rate of interest and method of valuation adopted for computing such
reserve), less a specified maximum percentage (not more than two and
one-half) of the amount insured by the policy and of existing dividend
additions thereto, if any, and less any existing indebtedness to the
company on or secured by the policy, the exact percentage to be specified
for each year for which required values are not included in the policy; if
more than one option is provided, the policy to specify which of such
options shall apply in the event of the insured's failure to notify the
company of his selection of an option. The policy shall provide that it may
be surrendered to the company at its home office within the period of grace
after the due date of the defaulted premium for a specified cash value not
less than the above prescribed minimum value of the stipulated form of
insurance; and any policy may also provide that the company may defer
payment for not more than six months after the application therefor is
made. Provided that any policy may also contain a provision that in event
of default in a premium payment before such options become available the
reserve on any dividend additions then in force may at the option of the
company be paid in cash or applied as a net premium to the purchase of
paid-up term insurance for any amount not in excess of the face of the
original policy. This subsection shall not apply to term insurance of
twenty years or less, but such term policy shall specify the mortality
table, rate of interest and method of valuation adopted for computing
reserves.
(2) This subsection shall apply only to policies of Industrial life
insurance issued prior to the operative date of section 229.2 (the Standard
Non-forfeiture Law).
The non-forfeiture benefit referred to in clause (f) of section 229,
shall be available in event of default in premium payments after premiums
shall have been paid for five full years, and shall be a stipulated form of
insurance effective from the due date of the defaulted premium, the net
value of which shall not be less than the reserve on the policy at the end
of the last completed quarter of the policy year for which premiums have
been paid, and all dividend additions thereto, if any, exclusive of any
reserve on total and permanent disability and additional accidental death
benefits, (the policy to specify the mortality table, rate of interest and
method of valuation adopted for computing such reserve), less a maximum
percentage (not more than two and one-half per centum) of the amount
insured by the policy and of existing dividend additions thereto, if any,
and less any existing indebtedness to the company on or secured by the
policy. The policy shall also specify said percentage, or other rule of
calculation so as to permit determination of the values, to be specified
for each year for which required values are not included in the policy. The
cash surrender value referred to in clause (h) of section 229, shall be
available upon surrender of the policy to the company at its home office
within the period of grace after the due date of the defaulted premium and
shall be not less than the above prescribed minimum value of the stipulated
form of insurance; provided that the company may defer payment for not more
than six months after the application therefor is made. This subsection
shall not apply to term insurance of twenty years or less but such term
policy shall specify the mortality table, rate of interest and method of
valuation adopted for computing reserves.
(Source: Laws 1943, Vol. 1, p. 824.)
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215 ILCS 5/229.2
(215 ILCS 5/229.2) (from Ch. 73, par. 841.2)
Sec. 229.2. Standard Non-forfeiture Law for Life Insurance. (1) No policy
of life insurance, except as stated in subsection (8),
shall be delivered or issued for delivery in this
State unless it contains in
substance the following provisions or corresponding provisions which in
the opinion of the Director are at least as favorable to the defaulting
or surrendering policyholder and are essentially in compliance with subsection
(7) of this law:
(i) That, in the event of default in any premium payment, the
company will grant, upon proper request not later than 60 days after the
due date of the premium in default, a paid-up nonforfeiture
benefit on
a plan stipulated in the policy, effective as of such due date, of such
amount as may be hereinafter specified. In lieu of such
stipulated paid-up nonforfeiture benefit, the company may substitute, upon
proper request not later than 60 days after the due date of the premium
in default, an actuarially equivalent alternative paid-up nonforfeiture
benefit which provides a greater amount or longer period of death benefits
or, if applicable, a greater amount or earlier payment of endowment benefits.
(ii) That, upon surrender of the policy within 60 days after the due
date of any premium payment in default after premiums have been paid for
at least 3 full years in the case of Ordinary insurance or 5 full years
in the case of Industrial insurance, the company will pay, in lieu of
any paid-up nonforfeiture benefit, a cash surrender value of such
amount as may be hereinafter specified.
(iii) That a specified paid-up nonforfeiture benefit
shall become
effective as specified in the policy unless the person entitled to make
such election elects another available option not later than 60 days
after the due date of the premium in default.
(iv) That, if the policy shall have become paid-up by completion of
all premium payments or if it is continued under any paid-up
nonforfeiture benefit which became effective on or
after the third
policy anniversary in the case of Ordinary insurance or the fifth policy
anniversary in the case of Industrial insurance, the company will pay,
upon surrender of the policy within 30 days after any policy
anniversary, a cash surrender value of such amount as may be hereinafter
specified.
(v) In the case of policies which cause on a basis guaranteed in the
policy unscheduled changes in benefits or premiums, or which provide an
option for changes in benefits or premiums other than a change to a new
policy, a statement of the mortality table, interest rate, and method used
in calculating cash surrender values and the paid-up nonforfeiture benefits
available under the policy. In the case of all other policies,
a statement of the mortality table and interest rate used in
calculating the cash surrender values and the paid-up nonforfeiture
benefits available under the policy, together with a table showing the
cash surrender value, if any, and paid-up nonforfeiture
benefit, if
any, available under the policy on each policy anniversary either during
the first 20 policy years or during the term of the policy, whichever is
shorter, such values and benefits to be calculated upon the assumption
that there are no dividends or paid-up additions credited to the policy
and that there is no indebtedness to the company on the policy.
(vi) A statement that the cash surrender values and the paid-up
nonforfeiture benefits available under the policy
are not less than the
minimum values and benefits required by or pursuant to the insurance law
of the state in which the policy is delivered; an explanation of the
manner in which the cash surrender values and the paid-up nonforfeiture
benefits are altered by the 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
benefits shown in the policy is not stated therein, a statement that
such method of computation has been filed with the insurance supervisory
official of the state in which the policy is delivered; and a statement
of the method to be used in calculating the cash surrender value and
paid-up nonforfeiture benefit available under the
policy on any policy
anniversary beyond the last anniversary 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 of insurance 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 for a period of 6 months after demand therefor with
surrender of the policy.
(2) (i) Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary, whether
or not required by subsection (1), shall be an amount not less than the
excess, if any, of the present value, on such anniversary, of the future
guaranteed benefits which would have been provided for by the policy,
including any existing paid-up additions, if there had been no default,
over the sum of (i) the then present value of the adjusted premiums as
defined in subsections 4, 4(a), 4(b) and 4(c), corresponding
to premiums which
would have fallen due on and after such anniversary, and (ii) the amount
of any indebtedness to the company on the policy.
(ii) For any policy issued on or after the operative date of subsection
4(c), which provides supplemental life insurance or annuity benefits at
the option of the insured for an identifiable additional premium by rider
or supplemental policy provision,
the cash surrender value shall be an amount not less than the sum of the
cash surrender value as determined in paragraph (i) for an otherwise similar
policy issued at the same age without such rider or supplemental policy
provision and the cash surrender value as determined in such paragraph for
a policy which provides only the benefits otherwise provided by such rider
or supplemental policy provision.
(iii) For any family policy issued on or after the operative date of subsection
4(c), which defines a primary insured and provides term insurance on the
life of the spouse of the primary insured expiring before the spouse attains
age 71, the cash surrender value shall be an amount not less than the sum
of the cash surrender value as determined in paragraph (i) for an otherwise
similar policy issued at the same age without such term insurance on the
life of the spouse and the cash surrender value as determined in such paragraph
for a policy which provides only the benefits otherwise provided by such
term insurance on the life of the spouse.
(iv) Any cash surrender
value available within 30 days after any policy anniversary under any
policy paid up by completion of all premium payments or any policy
continued under any paid-up nonforfeiture benefit, whether or not
required by subsection (1), shall be an amount not less than the present
value, on such anniversary, of the future guaranteed benefits provided
for by the policy, including any existing paid-up additions, decreased
by any indebtedness to the company on the policy.
(3) Any paid-up nonforfeiture benefit available
under the policy in
the event of default in a premium payment due on any policy anniversary
shall be such that its present value as of such anniversary 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.
(4) This subsection (4) shall not apply to policies issued on or after
the operative date of subsection (4c). Except as provided in the third
paragraph of this subsection,
the adjusted premiums for any policy shall be calculated on an annual
basis and shall be such uniform percentage of the respective premium
specified in the policy for each policy year, excluding any extra
premiums charged because of impairments or special hazards, that the
present value, at the date of issue of the policy, of all such adjusted
premiums shall be equal to the sum of (i) the then present value of the
future guaranteed benefits provided for by the policy; (ii) 2% of the
amount of insurance, if the insurance be uniform in amount, or of the
equivalent uniform amount, as hereinafter defined, if the amount of
insurance varies with duration of the policy; (iii) 40% of the adjusted
premium for the first policy year; (iv) 25% of either the adjusted
premium for the first policy year or the adjusted premium for a whole
life policy of the same uniform or equivalent uniform amount with
uniform premiums for the whole of life issued at the same age for the
same amount of insurance, whichever is less. Provided, however, that in
applying the percentages specified in (iii) and (iv) above, no adjusted
premium shall be deemed 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 subsection shall be the date as of which the rated age
of the insured is determined.
In the case of a policy providing an amount of insurance varying with
duration of the policy, the equivalent uniform amount thereof for the
purpose of this subsection shall be deemed to be the level amount of
insurance, provided by an otherwise similar policy, containing the same
endowment benefit or benefits, if any, issued at the same age and for
the same term, the amount of which does not vary with duration and the
benefits under which have the same present value at the inception of the
insurance as
the benefits under the policy; provided, however, that in the case of a
policy providing a varying amount of insurance issued on the life of a
child under age 10, the equivalent uniform amount may be computed as
though the amount of insurance provided by the policy prior to the
attainment of age 10 were the amount provided by such policy at age 10.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision shall be equal to (a)
the adjusted premiums for an otherwise similar policy issued at the same
age without such term insurance benefits, increased, during the period
for which premiums for such term insurance benefits are payable, by (b)
the adjusted premiums for such term insurance, the foregoing items (a)
and (b) being calculated separately and as specified in the first 2
paragraphs of this subsection except that, for the purposes of (ii),
(iii) and (iv) of the first such paragraph, the amount of insurance or
equivalent uniform amount of insurance used in the calculation of the
adjusted premiums referred to in (b) shall be equal to the excess of the
corresponding amount determined for the entire policy over the amount
used in the calculation of the adjusted premiums in (a).
Except as otherwise provided in subsections (4a) and (4b), all
adjusted premiums and present values referred to in this section shall
for all policies of Ordinary insurance be calculated on the basis of the
Commissioners 1941 Standard Ordinary Mortality Table, provided that for
any category of Ordinary insurance issued on female risks adjusted
premiums and present values may be calculated according to an age not
more than 3 years younger than the actual age of the insured, and such
calculations for all policies of Industrial insurance shall be made on
the basis of the 1941 Standard Industrial Mortality Table. All
calculations shall be made on the basis of the rate 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 the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than 130% of the
rates of mortality according to such applicable table. Provided,
further, that for insurance issued on a substandard basis, the
calculation of any such adjusted premiums and present values may be
based on such other table of mortality as may be specified by the
company and approved by the Director.
(4a) This subsection (4a) shall not apply to Ordinary policies issued
on or after the operative date of subsection (4c). In the case of Ordinary
policies issued on or after the
operative date of this subsection (4a) as defined herein, all adjusted
premiums and present values referred to in this Section shall be
calculated on the basis of the Commissioners 1958 Standard Ordinary
Mortality Table and the rate of interest specified in the policy for calculating
cash surrender values and
paid-up nonforfeiture benefits, provided that such
rate of interest shall not exceed 3 1/2% per annum except that a rate of
interest not exceeding 5 1/2% per annum may be used for policies issued
on or after September 8, 1977, except that for any single premium
whole life or endowment insurance policy a rate of interest not exceeding
6 1/2% per annum may be used and provided that for any category of
Ordinary insurance issued on female risks, adjusted premiums and present
values may be calculated according to an age not more than 6 years
younger than the actual age of the insured. Provided, however, that in
calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those shown
in the Commissioners 1958 Extended Term Insurance Table. Provided,
however, that for insurance issued on a substandard basis, the
calculation for any such adjusted premiums and present values may be
based on such other table of mortality as may be specified by the
company and approved by the Director. After the effective date of this
subsection (4a), any company may file with the Director written notice
of its election to comply with the provisions of this subsection after a
specified date before January 1, 1966. After the filing of such notice,
then upon such specified date (which shall be the operative date of this
subsection for such company), this subsection shall become operative
with respect to the Ordinary policies thereafter issued by such company.
If a company makes no such election, the operative date of this
subsection for such company shall be January 1, 1966.
(4b) This subsection (4b) shall not apply to Industrial policies issued
on or after the operative date of subsection (4c). In the case of Industrial
policies issued on or after the
operative date of this subsection (4b) as defined herein, all adjusted
premiums and present values referred to in this Section shall be
calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table and the rate of interest specified in the policy for calculating
cash surrender values and
paid-up nonforfeiture benefits, provided that such
rate of interest shall not exceed 3 1/2% per annum except that a rate of
interest not exceeding
5 1/2% per annum may be used for policies issued on or after September
8, 1977, except
that for any single premium whole life or endowment insurance policy 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 with accompanying pure
endowment, if any, offered as a nonforfeiture benefit,
the rates of
mortality assumed may be not more than those shown in the Commissioners
1961 Industrial Extended Term Insurance Table. Provided, further, that
for insurance issued on a substandard basis, the calculations of any
such adjusted premiums and present values may be based on such other
table of mortality as may be specified by the company and approved by
the Director. After the effective date of this subsection (4b), any
company may file with the Director a written notice of its election to
comply with the provisions of this subsection after a specified date
before January 1, 1968. After the filing of such notice, then upon such
specified date (which shall be the operative date of this subsection for
such company), this subsection shall become operative with respect to
the Industrial policies thereafter issued by such company. If a company
makes no such election, the operative date of this subsection for such
company shall be January 1, 1968.
(4c)(a) This subsection shall apply to all policies issued on or after
its operative date. Except as provided in paragraph (g), the adjusted premiums
for any policy shall be calculated on an annual basis and shall be such
uniform percentage of the respective premiums specified in the policy for
each policy year, excluding amounts payable as extra premiums to cover impairments
or special hazards and any uniform annual contract charge or policy fee
specified in the policy in a statement of the method to be used in calculating
the cash surrender value and paid-up nonforfeiture benefits of the policy,
that the present value, at the date of issue of the policy, of all adjusted
premiums shall be equal to the sum of (i) the then present value of the
future guaranteed benefits provided for by the policy; (ii) 1% 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 10 policy years;
and (iii) 125% of the nonforfeiture net level premium as hereinafter defined.
In applying the percentage specified in (iii), however,
no nonforfeiture net level premium shall exceed 4% 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 10 policy years. The
date of issue of a policy for the purpose of this subsection is the date
as of which the rated age of the insured is determined.
(b) The nonforfeiture net level premium equals the present value, at the
date of issue of the policy, of the guaranteed benefits provided for by
the policy divided by the present value, at the date of issue of the policy,
of an annuity of one per annum payable on the date of issue of the policy
and on each anniversary of such policy on which a premium falls due.
(c) In the case of a policy which causes, on a basis guaranteed in such
policy, unscheduled changes in benefits or premiums, or which provides an
option for changes in benefits or premiums other than a change to a new
policy, adjusted premiums and present values shall initially be calculated
on the assumption that future benefits and premiums do not change from those
stipulated at the date of issue of such policy. At the time of any such
change in the benefits or premiums, the future adjusted premiums, nonforfeiture
net level premiums and present values shall be recalculated on the assumption
that future benefits and premiums do not change from those stipulated by
such policy immediately after the change.
(d) Except as otherwise provided in paragraph (g), the recalculated future
adjusted premiums for any policy shall be such uniform percentage of the
respective future premiums specified in the policy for each policy year,
excluding amounts payable as extra premiums to cover impairments and special
hazards and any uniform annual contract charge or policy fee specified in
the policy in a statement of the method to be used in calculating the cash
surrender values and paid-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) the sum
of (i) the then present value of the then future guaranteed benefits provided
for by the policy and (ii) the additional expense allowance, if any, over
(B) the then cash surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance at the time of the change to the
newly defined benefits or premiums shall be the sum of
(i) 1% of the excess, if positive, of the average amount of insurance at
the beginning of each of the first 10 policy years subsequent to the change
over the average amount of insurance prior to the change at the beginning
of each of the first 10 policy years subsequent to the time of the most
recent previous change, or, if there has been no previous change, the date
of issue of the policy; and (ii) 125% of the increase, if positive, in
the nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium equals the result
obtained by dividing X by Y, where
(i) X equals the sum of
(A) the nonforfeiture net level premium applicable prior to the change
times the present value of an annuity of one per annum payable on each anniversary
of the policy on or subsequent to the date of the change on which a premium
would have fallen due had the change not occurred, and
(B) the present value of the increase in future guaranteed benefits provided
for by the policy; and
(ii) Y equals the present value of an annuity of one per annum payable
on each anniversary of the policy on or subsequent to the date of change
on which a premium falls due.
(g) Notwithstanding any other provisions of this subsection to the contrary,
in the case of a policy issued on a substandard basis which provides reduced
graded amounts of insurance so that, in each policy year, such policy has
the same tabular mortality cost as an otherwise similar policy issued on
the standard basis which provides higher uniform amounts of insurance, adjusted
premiums and present values for such substandard policy may be calculated
as if it were issued to provide such higher uniform amounts of insurance
on the standard basis.
(h) All adjusted premiums and present values referred to in this Section
shall for all policies of ordinary insurance be calculated on the basis
of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election
of the company for any one or more specified plans of life
insurance, the Commissioners 1980 Standard Ordinary Mortality Table with
Ten-Year Select Mortality Factors. All adjusted premiums and present values
referred to in this Section shall for all policies of Industrial insurance
be calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table. All adjusted premiums and present values referred to in
this Section for all policies issued in a particular calendar year shall
be calculated on the basis of a rate of interest not exceeding
the nonforfeiture interest rate as defined in this subsection for policies
issued in that calendar year. The provisions of this paragraph are subject
to the provisions set forth in subparagraphs (i) through (vii).
(i) At the option of the company, calculations for all policies issued
in a particular calendar year may be made on the basis of a rate of interest
not exceeding the nonforfeiture interest rate, as defined in this subsection,
for policies issued in the immediately preceding calendar 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 (1), shall be calculated on the basis of the mortality table
and rate of interest used in determining the amount of such paid-up nonforfeiture
benefit and paid-up dividend additions, if any.
(iii) A company may calculate the amount of any guaranteed paid-up nonforfeiture
benefit, including any paid-up additions under the policy, on the basis
of an interest rate no lower than that specified in the policy for calculating
cash surrender values.
(iv) In calculating the present value of any paid-up term insurance with
an accompanying pure endowment, if any, offered as a nonforfeiture benefit,
the rates of mortality assumed may be not more than those shown in the Commissioners
1980 Extended Term Insurance Table for policies of ordinary insurance and
not more than the Commissioner 1961 Industrial Extended Term Insurance Table
for policies of industrial insurance.
(v) For insurance issued on a substandard basis, the calculation of any
such adjusted premiums and present values may be based on appropriated modifications
of the aforementioned tables.
(vi) For policies issued prior to the operative date of the Valuation Manual, any Commissioners Standard Mortality Table adopted after 1980 by the National Association
of Insurance Commissioners and approved by regulations promulgated
by the Director for use in determining the minimum nonforfeiture standard
may be substituted for the Commissioners 1980 Standard Ordinary Mortality
Table with or without Ten-Year Select Mortality Factors or for the Commissioners
1980 Extended Term Insurance Table.
For policies issued on or after the operative date of the Valuation Manual, the Valuation Manual shall provide the Commissioners Standard Ordinary Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. If the Director approves by regulation any Commissioners Standard Ordinary Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (vii) For policies issued prior to the operative date of the Valuation Manual, any Commissioners Standard Industrial Mortality Table adopted after 1980 by the National
Association of Insurance Commissioners and approved by regulations promulgated
by the Director for use in determining the minimum nonforfeiture standard
may be substituted for the Commissioners 1961 Standard Industrial Mortality
Table or the Commissioners 1961 Industrial Extended Term Insurance Table.
For policies issued on or after the operative date of the Valuation Manual, the Valuation Manual shall provide the Commissioners Standard Industrial Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. If the Director approves by regulation any Commissioners Standard Industrial Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (i) The nonforfeiture interest rate is defined as follows: (i) For policies issued prior to the operative date | | of the Valuation Manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to 125% of the calendar year statutory valuation interest rate for such policy, as defined in the Standard Valuation Law, rounded to the nearest .25%, provided, however, that the nonforfeiture interest rate shall not be less than 4.00%.
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(ii) For policies issued on and after the operative
| | date of the Valuation Manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be provided by the Valuation Manual.
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| (j) Notwithstanding any other provision in this Code to the contrary,
any refiling of nonforfeiture values or their methods of computation for
any previously approved policy form which involves only a change in the
interest rate or mortality table used to compute nonforfeiture values shall
not require refiling of any other provisions of that policy form.
(k) After the effective date of this subsection, any company may, with
respect to any category of insurance, file with the Director a written notice
of its election to comply with the provisions of this subsection after a
specified date before January 1, 1989. That date
shall be the operative date of this subsection for that category of insurance
for such company. If
a company makes no such election, the operative date of this subsection
for that category of insurance issued by such company shall be January 1, 1989.
(5) In the case of any plan of life insurance which provides for future
premium determination, the amounts of which are to be determined by the
insurance company based on then estimates of future experience, or in the
case of any plan of life insurance which is of such a nature that minimum
values cannot be determined by the methods described in subsections (1),
(2), (3), (4), (4a), (4b) or (4c), then
(a) the Director shall satisfy himself that the benefits provided under
such plan are substantially as favorable to policyholders and insured parties
as the minimum benefits otherwise required by subsections (1), (2), (3),
(4), (4a), (4b) or (4c);
(b) the Director shall satisfy himself that the benefits and the pattern
of premiums of that plan are not such as to mislead prospective policyholders
or insured parties; and
(c) the cash surrender values and paid-up nonforfeiture benefits provided
by such plan shall not be less than the minimum values and benefits computed
by a method consistent with the principles of this Standard Nonforfeiture
Law for Life Insurance, as determined by regulations promulgated by the Director.
(6) Any cash surrender value and any paid-up nonforfeiture benefit,
available under the policy in the event of default in a premium payment
due at any time other than on the policy anniversary, shall be
calculated with allowance for the lapse of time and the payment of
fractional premiums beyond the last preceding policy anniversary. All
values referred to in subsections (2), (3), (4), (4a), (4b)
and (4c) may be
calculated upon the assumption that any death benefit is payable at the
end of the policy year of death. The net value of any paid-up additions,
other than paid-up term additions, shall be not less than the amounts
used to provide such additions. Notwithstanding the provisions of
subsection (2), additional benefits payable (i) in the event of death or
dismemberment by accident or accidental means, (ii) in the event of
total and permanent disability, (iii) as reversionary annuity or
deferred reversionary annuity benefits, (iv) as term insurance benefits
provided by a rider or supplemental policy provision to which, if issued
as a separate policy, this section would not apply, (v) as term
insurance on the life of a child or on the lives of children provided in
a policy on the life of a parent of the child, if such term insurance
expires before the child's age is 26, is uniform in amount after the
child's age is one, and has not become paid-up by reason of the death of
a parent of the child, and (vi) as other policy benefits additional to
life insurance and endowment benefits, and premiums for all such
additional benefits, shall be disregarded in ascertaining cash surrender
values and nonforfeiture benefits required by this section, and no such
additional benefits shall be required to be included in any paid-up
nonforfeiture benefits.
(7) This subsection shall apply to all policies issued on or after January
1, 1987. 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 .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 10 policy years, from the
sum of (a) the greater of zero and the basic cash value hereinafter specified
and (b) the present value of any existing paid-up additions less the amount
of any indebtedness to the company under the policy.
The basic cash value equals the present value, on such 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 company, if there had been no default, 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. The effects on the basic cash value of supplemental life insurance
or annuity benefits or of family coverage, as described in subsection (2)
or (4), whichever is applicable, shall, however, be the same as are the
effects specified in subsection (2) or (4), whichever is applicable, on
the cash surrender values defined in that subsection.
The nonforfeiture factor for each policy year equals a percentage of the
adjusted premium for the policy year, as defined in subsection (4) or (4c),
whichever is applicable. Except as is required by the next succeeding sentence
of this paragraph, such percentage
(a) shall 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 .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 10 policy years; and
(b) shall be such that no percentage after the later of the 2 policy anniversaries
specified in the preceding item (a) may apply to fewer than 5 consecutive policy years.
No basic cash value may be less than the value which would be obtained
if the adjusted premiums for the policy, as defined in subsection (4) or
(4c), whichever is applicable, were substituted for the nonforfeiture factors
in the calculation of the basic cash value.
All adjusted premiums and present values referred to in this subsection
shall for a particular policy be calculated on the same mortality and interest
bases as those used in accordance with the other
subsections of this law. The cash surrender values referred to in this
subsection shall include any endowment benefits provided for by the policy.
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 subsections
1, 2, 3, 4c, and 6. The amounts of any cash surrender values and of any
paid-up nonforfeiture benefits granted in connection with additional benefits
such as those listed as items (i) through (vi) in subsection (6) shall conform
with the principles of this subsection (7).
(8) This Section shall not apply to any of the following:
(a) reinsurance,
(b) group insurance,
(c) a pure endowment,
(d) an annuity or reversionary annuity contract,
(e) a term policy of uniform amount, which provides no guaranteed nonforfeiture
or endowment benefits, or renewal thereof, of 20 years or
less expiring before age 71, for which uniform premiums are payable
during the entire term of the policy,
(f) a term policy of
decreasing amount, which provides no guaranteed nonforfeiture or endowment
benefits, on which each adjusted premium, calculated as
specified in subsections (4), (4a), (4b) and (4c), is less
than the adjusted
premium so calculated, on a term policy of uniform
amount, or renewal thereof, which provides no guaranteed nonforfeiture or
endowment benefits, issued at the same
age and for the same initial amount of insurance and for a term of 20
years or less expiring before age 71, for which uniform premiums are payable
during the entire term of the policy,
(g) a policy, which provides no guaranteed nonforfeiture or endowment
benefits, for which no cash surrender value, if any, or present value of
any paid-up nonforfeiture benefit, at the beginning of any policy year,
calculated as specified in subsections (2), (3), (4), (4a), (4b) and (4c),
exceeds 2.5% of the amount of insurance at the beginning of the same policy year,
(h) any policy
which shall be delivered outside this State through an agent or other
representative of the company issuing the policy.
For purposes of determining the applicability of this Section, the age
of expiry for a joint term life insurance policy shall be the age of expiry
of the oldest life.
(9) For the purposes of this Section:
"Operative date of the Valuation Manual" means the January 1 of the first calendar year that the Valuation Manual is effective.
"Valuation Manual" has the same meaning as set forth in Section 223 of this Code.
(Source: P.A. 99-162, eff. 1-1-16 .)
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215 ILCS 5/229.3
(215 ILCS 5/229.3) (from Ch. 73, par. 841.3)
Sec. 229.3.
Loan provisions in policies.
In the case of those policies issued prior to the operative date of
Section 229.2 (the Standard Non-forfeiture Law) the loan value referred
to in clause (f) of section 224 shall be the reserve at the end of the
current policy year on the policy and on the dividend additions thereto, if
any, exclusive of the reserve on account of total and permanent disability
and additional accidental death benefits, less a specified maximum
percentage (not more than two and one-half) of the amount insured by the
policy and of any dividend additions thereto (the policy to specify the
mortality table, rate of interest and method of valuation adopted for
computing such reserve), the exact percentage to be specified for each year
for which required values are not included in the policy. The policy may
also provide that such loan may be deferred for not exceeding six months
after the application therefor is made.
(2) In the case of policies issued on or after the operative date of
Section 229.2 (the Standard Non-forfeiture Law) the loan value referred to
in clause (f) of section 224 shall be the cash surrender value at the end
of the current policy year as required by section 229.2. The company shall
reserve the right to defer such loan, except when made to pay premiums, for
six months after application therefor is made.
(Source: Laws 1943, vol. 1, p. 824 .)
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215 ILCS 5/229.4
(215 ILCS 5/229.4) (from Ch. 73, par. 841.4)
Sec. 229.4. (Repealed). (Source: P.A. 93-873, eff. 8-6-04. Repealed internally, eff. 7-1-06.)
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215 ILCS 5/229.4a (215 ILCS 5/229.4a)
Sec. 229.4a. Standard Nonforfeiture Law for Individual Deferred
Annuities. (1)
Title.
This Section shall be known as the Standard Nonforfeiture Law for Individual Deferred Annuities. (2) Applicability.
This Section shall not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract which shall be delivered outside this State through an agent or other representative of the company issuing the contract. (3) Nonforfeiture Requirements. (A) In the case of contracts issued on or after the | | operative date of this Section as defined in subsection (13), no contract of annuity, except as stated in subsection (2), shall be delivered or issued for delivery in this State unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the Director of Insurance are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract:
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| (i) That upon cessation of payment of
| | considerations under a contract, or upon the written request of the contract owner, the company shall grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (5), (6), (7), (8), and (10);
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| (ii) If a contract provides for a lump sum
| | settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company shall pay in lieu of a paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (5), (6), (8), and (10). The company may reserve the right to defer the payment of the cash surrender benefit for a period not to exceed 6 months after demand therefor with surrender of the contract after making written request and receiving written approval of the Director. The request shall address the necessity and equitability to all policyholders of the deferral;
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| (iii) A statement of the mortality table, if any,
| | and interest rates used calculating any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of the benefits; and
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| (iv) A statement that any paid-up annuity, cash
| | surrender, or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which the benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract.
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| (B) Notwithstanding the requirements of this Section,
| | a deferred annuity contract may provide that if no considerations have been received under a contract for a period of 2 full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from prior considerations paid would be less than $20 monthly, the company may at its option terminate the contract by payment in cash of the then present value of the portion of the paid-up annuity benefit, calculated on the basis on the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by this payment shall be relieved of any further obligation under the contract.
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| (4) Minimum values. The minimum values as specified in subsections (5), (6), (7), (8), and (10) of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection.
(A)(i) The minimum nonforfeiture amount at any time
| | at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest as indicated in subdivision (4)(B) of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of paragraphs (a) through (d) below:
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| (a) Any prior withdrawals from or partial
| | surrenders of the contract accumulated at rates of interest as indicated in subdivision (4)(B);
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| (b) An annual contract charge of $50, accumulated
| | at rates of interest as indicated in subdivision (4)(B);
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| (c) Any premium tax paid by the company for the
| | contract, accumulated at rates of interest as indicated in subdivision (4)(B); and
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| (d) The amount of any indebtedness to the company
| | on the contract, including interest due and accrued.
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| (ii) The net considerations for a given contract year
| | used to define the minimum nonforfeiture amount shall be an amount equal to 87.5% of the gross considerations, credited to the contract during that contract year.
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| (B) The interest rate used in determining minimum
| | nonforfeiture amounts shall be an annual rate of interest determined as the lesser of 3% per annum and the following, which shall be specified in the contract if the interest rate will be reset:
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| (i) The 5-year Constant Maturity Treasury Rate
| | reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under subdivision (4)(B)(iv);
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| (ii) Reduced by 125 basis points;
(iii) Where the resulting interest rate is not
| | (iv) The interest rate shall apply for an initial
| | period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the 5-year Constant Maturity Treasury Rate to be used at each redetermination date.
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| (C) During the period or term that a contract
| | provides substantive participation in an equity indexed benefit, it may increase the reduction described in subdivision (4)(B)(ii) above by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed market value of the benefit. The Director may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. Lacking such a demonstration that is acceptable to the Director, the Director may disallow or limit the additional reduction.
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| (D) The Director may adopt rules to implement the
| | provisions of subdivision (4)(C) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the Director determines adjustments are justified.
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| (5) Computation of Present Value.
Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Present value shall be computed using the mortality table, if any, and the interest rates specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
(6) Calculation of Cash Surrender Value.
For contracts that provide cash surrender benefits, the cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit that would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than 1% higher than the interest rate specified in the contract for accumulating the net considerations to determine maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
(7) Calculation of Paid-up Annuity Benefits.
For contracts that do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is
surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine maturity value, and increased by any additional amounts credited by the company to the contract. For contracts that do not provide any death benefits prior to the commencement of any annuity payments, present values shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
(8) Maturity Date.
For the purpose of determining the benefits calculated under subsections (6) and (7), in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.
(9) Disclosure of Limited Death Benefits.
A contract that does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not
provided.
(10) Inclusion of Lapse of Time Considerations.
Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
(11) Proration of Values; Additional Benefits.
For a contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (5), (6), (7), (8), and (10), additional benefits payable in the event of total and permanent disability, as reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts,
paid-up annuity, cash surrender, and death benefits that may be required under this Section. The inclusion of such benefits shall not be required in any paid-up benefits, unless the additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits.
(12) Rules. The Director may adopt rules to implement the provisions of this Section.
(13) Effective Date. After August 6, 2004 (the effective date of Public Act 93-873), a company may elect to apply its provisions to annuity
contracts on a contract form-by-contract form basis before July 1, 2006. In all other instances, this Section shall become operative with respect to annuity contracts issued by the company on or after July 1, 2006.
(14) (Blank).
(Source: P.A. 102-775, eff. 5-13-22; 103-154, eff. 6-30-23.)
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215 ILCS 5/229.5
(215 ILCS 5/229.5) (from Ch. 73, par. 841.5)
Sec. 229.5.
Policy loan interest rates.
(a) As used in this Section,
unless the context requires otherwise:
(1) "Policy" includes certificates issued by a fraternal benefit society
and annuity contracts which provide for policy loans.
(2) "Policy loan" includes any premium loan made under a policy to pay
one or more premiums that were not paid to the life insurer as they became due.
(3) "Policyholder" includes the owner of the policy or the person designated
to pay premiums as shown on the records of the life insurer.
(4) "Published Monthly Average" means:
(i) Moody's Corporate Bond Yield Average - Monthly Average Corporates
as published by Moody's Investors Service, Inc., or any successor thereto; or
(ii) In the event that Moody's Corporate Bond Yield Average - Monthly Average
Corporates is no longer published, a substantially similar average, established
by regulation issued by the Director.
(b) Maximum rate of interest on policy loans.
(1) Policies issued on or after the effective date of this amendatory
Act of 1981 shall provide for policy loan interest rates as follows:
(i) A provision permitting a maximum interest rate of not more than 8% per annum; or
(ii) A provision permitting an adjustable maximum interest rate established
from time to time by the life insurer as permitted by law.
(2) The rate of interest charged on a policy loan made under subsection
(1)(ii) shall not exceed the higher of the following:
(i) The Published Monthly Average for the calendar month ending 2 months
before the date on which the rate is determined; or
(ii) The rate used to compute the cash surrender values under the policy
during the applicable period plus 1% per annum.
(3) If the maximum rate of interest is determined pursuant to clause
(ii) of paragraph (1) of this subsection (b), the policy shall contain a
provision setting forth the frequency at which the rate is to be determined
for that policy.
(4) The maximum rate for each policy must be determined at regular intervals
at least once every 12 months, but not more frequently than once in any
3 month period. At the intervals specified in the policy:
(i) The rate being charged may be increased whenever such change as determined
under paragraph (2) of this subsection (b) would increase that rate by 1/2%
or more per annum.
(ii) The rate being charged must be reduced whenever such reduction as
determined under paragraph (2) of this subsection (b) would decrease that
rate by 1/2% or more per annum.
(5) The life insurer shall:
(i) notify the policyholder at the time a cash loan is made of the initial
rate of interest on the loan;
(ii) notify the policyholder with respect to premium loans of the initial
rate of interest on the loan as soon as it is reasonably practical to do
so after making the initial loan. Notice need not be given to the policyholder
when a further premium loan is added, except as provided in (iii) below;
(iii) send to policyholders with loans a reasonable advance notice of
any increase in the rate; and
(iv) include in the notices required above the substance of the pertinent
provisions of paragraph (1) and (3) of this subsection (b).
(6) The loan value of the policy shall be determined in accordance with
Section 229.3, but no policy shall terminate in a policy year as the sole
result of change in the interest rate during that policy year, and the
life insurer shall maintain coverage during that policy year until such
time as it would otherwise have terminated if there had been no change in
the interest rate during that policy year.
(7) The substance of the pertinent provisions of paragraphs (1) and (3)
of this subsection (b) shall be set forth in the policies to which they apply.
(8) For purposes of this Section, the rate of interest on policy loans
permitted under this Section includes the interest rate charged on
reinstatement
of policy loans for the period during and after any lapse of a policy.
(9) No other provisions of law shall apply to policy loan interest rates
unless made specifically applicable to such rates.
(c) The provisions of this Section shall not apply to any insurance contract
issued before the effective date of this amendatory Act of 1981, unless the
policyholder agrees in writing to the applicability of such provisions.
(Source: P.A. 83-1362.)
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215 ILCS 5/230.1
(215 ILCS 5/230.1) (from Ch. 73, par. 842.1)
Sec. 230.1.
Group Insurance Definition.
Except as provided in Section
230.2, no policy of group life insurance shall be delivered in this State
unless it conforms to one of the following descriptions:
(A) A policy issued to an employer, or to the trustees of a fund established
by an employer, which employer or trustees shall be deemed the policyholder,
to insure employees of the employer for the benefit of persons other than the
employer, subject to the following requirements:
(1) The employees eligible for insurance under the policy shall be all
of the employees of the employer, or all of any class or classes thereof.
The policy may provide that the term "employees" shall include the employees
of one or more subsidiary corporations, and the employees, individual proprietors,
and partners of one or more affiliated corporations, proprietorships or
partnerships if the business of the employer and of such affiliated corporations,
proprietorships, or partnerships is under common control. The policy may
provide that the term "employees" shall include the individual proprietor
or partners if the employer is an individual proprietorship or partnership.
The policy may provide that the term "employees" shall include retired employees
and directors of a corporate employer. A policy issued to insure the employees
of a public body may provide that the term "employees" shall include elected
or appointed officials.
(2) The premium for the policy shall be paid either from the employer's
funds or from funds contributed by the insured employees, or from both.
Except as provided in paragraph (3) of this subsection (A), a policy on
which no part of the premium is to be derived from funds contributed by
the insured employees must insure all eligible employees, except those who
reject such coverage in writing.
(3) An insurer may exclude or limit the coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(B) A policy issued to a creditor or its parent holding company or to
a trustee or trustees or agent designated by two or more creditors, which
creditor, holding company, affiliate, trustee, trustees, or agent shall
be deemed the policyholder, to insure debtors of the creditor, or creditors,
subject to the following requirements:
(1) The debtors eligible for insurance under the policy shall be all of
the debtors of the creditor or creditors, or all of any class or classes
thereof. The policy may provide that the term "debtors" shall include (i)
borrowers of money or purchasers or lessees of goods, services, or property
for which payment is arranged through a credit transaction; (ii) the debtors
of one or more subsidiary corporations; and (iii) the debtors of one or
more affiliated corporations, proprietorships, or partnerships if the business
of the policyholder and of such affiliated corporations, proprietorships,
or partnerships is under common control.
(2) The premium for the policy shall be paid either from the creditor's
funds, or from charges collected from the insured debtors, or from both. Except
as provided in paragraph (3) of this subsection (B), a policy on which no
part of the premium is to be derived from the funds contributed by insured
debtors specifically for their insurance must insure all eligible debtors.
(3) An insurer may exclude any debtors as to whom evidence of individual
insurability is not satisfactory to the insurer.
(4) The amount of the insurance on the life of any debtor shall at no
time exceed the greater of the scheduled or actual amount of unpaid indebtedness
to the creditor.
(5) The insurance may be payable to the creditor or any successor to the
right, title, and interest of the creditor. Such payment shall reduce or
extinguish the unpaid indebtedness of the debtor to the extent of such payment.
Whenever the amount of insurance payable exceeds the amount of outstanding
indebtedness the excess benefit shall be payable to the person otherwise contractually
or legally entitled thereto; if there be no person determined to be so entitled,
such excess shall be paid to the estate of the insured person.
(6) Notwithstanding the provisions of the above paragraphs, insurance
on agricultural credit transaction commitments may be written up to the
amount of the loan commitment on a non-decreasing or level term plan. Insurance
on educational credit transaction commitments may be written up to the amount
of the loan commitment less the amount of any repayments made on the loan.
(C) A policy issued to a labor union, or similar employee organization,
which shall be deemed to be the policyholder, to insure members of such
union or organization for the benefit of persons other than the union or
organization or any of its officials, representatives, or agents, subject
to the following requirements:
(1) The members eligible for insurance under the policy shall be all of
the members of the union or organization, or all of any class or classes thereof.
(2) The premium for the policy shall be paid either from funds of the
union or organization, or from the funds contributed by the insured members
specifically for their insurance, or from both. Except as provided in paragraph
(3) of this subsection (C), a policy on which no part of the premium is
to be derived from funds contributed by the insured members specifically
for their insurance must insure all eligible members, except those who reject
such coverage in writing.
(3) An insurer may exclude or limit the coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(D) A policy issued to a trust or to the trustees of a fund established
by two or more employers, or by one or more labor unions or similar employee
organizations, or by one or more employers and one or more labor unions
or similar employee organizations, which trust or trustees shall be deemed
the policyholder, to insure employees of the employers or members of the
unions or organizations for the benefit of persons other than the employers
or the unions or organizations, subject to the following requirements:
(1) The persons eligible for insurance shall be all employees of the employers
or all of the members of the unions or organizations, or all of any class
or classes thereof. The policy may provide that the term "employees" shall
include retired employees, the individual proprietor or partners if an employer
is an individual proprietorship or a partnership, and directors of a corporate
employer. The policy may provide that the term "employees" shall include
the trustees or their employees, or both, if their duties are principally
connected with such trusteeship.
(2) The premium for the policy shall be paid from funds contributed by
the employer or employers of the insured persons, or by the union or unions
or similar employee organizations, or by both, or from funds contributed
by the insured persons or from both the insured persons and the employer
or union or similar employee organizations. Except as provided in paragraph
(3) of this subsection
(D), a policy on which no part of the premium is to be derived from funds
contributed by the insured persons
specifically for their insurance must insure all eligible persons, except
those who reject such coverage in writing.
(3) An insurer may exclude or limit the coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(E) A policy issued to an association or to a trust or to the trustees
of a fund established, created, or maintained for the benefit of members
of one or more associations. The association or associations shall have
at the outset a minimum of 100 persons; shall have been organized and maintained
in good faith for purposes other than that of obtaining insurance; shall
have been in active existence for at least two years; and shall have a constitution
and by-laws which provides that (i) the association or associations hold
regular meetings not less than annually to further purposes of the members,
(ii) except for credit unions, the association or associations collect dues
or solicit contributions from members, and (iii) the members have voting
privileges and representation on the governing board and committees. The
policy shall be subject to the following requirements:
(1) The policy may insure members of such association or associations,
employees thereof or employees of members, or one or more of the preceding
or all of any class or classes thereof for the benefit of persons other
than the employee's employer.
(2) The premium for the policy shall be paid from funds contributed by
the association or associations, or by employer members, or by both, or
from funds contributed by the covered persons or from both the covered persons
and the association, associations, or employer members.
(3) Except as provided in paragraph (4) of this subsection (E), a policy
on which no part of the premium is to be derived from funds contributed
by the covered persons specifically for the insurance must insure all eligible
persons, except those who reject such coverage in writing.
(4) An insurer may exclude or limit the coverage of any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(Source: P.A. 83-1465.)
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215 ILCS 5/230.2
(215 ILCS 5/230.2) (from Ch. 73, par. 842.2)
Sec. 230.2.
Limits of Group Life Insurance.
Group life insurance offered
to a resident of this State under a group life insurance policy issued to
a group other than one described in Section 230.1 shall be subject to the
following requirements:
(A) No such group life insurance policy shall be delivered in this State
unless the Director finds that:
(1) The issuance of such group policy is not contrary to the best interest
of the public;
(2) The issuance of the group policy would be actuarially sound;
(3) The issuance of the group policy would result in economies of acquisition
or administration; and
(4) The benefits are reasonable in relation to the premiums charged.
(B) No such group life insurance coverage may be offered in this State
by an insurer under a policy issued in another State unless this State or
another State having requirements substantially similar to those contained
in subsection (A) of this Section has made a determination that such requirements
have been met.
(C) The premium for the policy shall be paid either from the policyholder's
funds or from funds contributed by the covered persons, or from both.
(D) An insurer may exclude or limit coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(Source: P.A. 83-598.)
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215 ILCS 5/230.3
(215 ILCS 5/230.3) (from Ch. 73, par. 842.3)
Sec. 230.3.
Dependent Group Life Insurance.
Except for a policy issued
under subsection (B) of Section 230.1, a group life insurance policy may
be extended to insure the employees or members against loss due to the death
of their spouses and dependent children, or any class or classes thereof,
subject to the following:
(A) The premium for the insurance shall be paid either from funds
contributed by the employer, union, association, or other person to whom the
policy has been issued, or from funds contributed by the covered persons, or
from both. Except as provided in subsection (B) of this Section, a policy on
which no part of the premium for the spouse's and dependent child's coverage is
to be derived from funds contributed by the covered persons must insure all
eligible employees or members with respect to their spouses and dependent
children, or any class or classes thereof.
(B) An insurer may exclude or limit the coverage on any spouse or dependent
child as to whom evidence of individual insurability is not satisfactory to the
insurer.
(C) The amount of insurance for any covered spouse or dependent child under
the policy may not exceed 100% of the amount of insurance for which the
employee or member is insured.
(Source: P.A. 88-400.)
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