(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 |
(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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