Current through Register Vol. 48, No. 12, March 22, 2024
a)
Payment of Premiums
1) Advance Premium
Deposits - A fund or account for payment of unspecified premiums (whether by
policy or by rider) must conform to the requirements of Section 240 of the
Code.
2) Grace Period - Policy must
provide for continuance in force during the grace period and deduction (not
necessarily payment) of any unpaid premium in settlement under the policy
pursuant to Section 224(1)(b) of the Code.
b) Continuation of Premiums Beyond Maturity
If a policy provides for continuation of premiums, on an
optional basis, beyond an initial or normal maturity date, it must be made
clear that coverage and all applicable policy provisions also continue while
premiums are being paid. The policyholder must be made aware of applicable
policy values while premiums are so continued: either by including those values
in the policy or by specifying that notices of the current value will be sent
to the policyholder upon request.
c) Automatic Premium Loan Provision
1) Policy may provide benefit on a positive
elective basis, but not as an automatic nonforfeiture benefit. For provisions
regarding automatic premium loans in applications, see Section
1405.30(c).
2) Provision must conform to the loan
provision of the policy, subject to Sections 224(1)(f), 229.3 and 229.5 of the
Code. The provision must permit revocation of election upon written
request.
3)
Notification of
the policyholder with respect to the initial interest rate on an
automatic premium loan must be made as soon as it is reasonably
practicable after making the initial loan, but in no event more than
90 days after the initial loan is made. Notification need not be given
to the policyholder when a further premium loan is added unless a loan rate
increase occurs (Section 229.5(b)(5)(ii) and (iii) of the Code). When
a loan rate increase occurs, reasonable advance notice of any increase in rate
must be made. In no event shall the notice be given less than 15 days prior to
the increase in rate.
d)
Loan Interest Rate
1) Provision must conform
to Sections 224(1)(f), 229.3 and 229.5 of the Code. Any variable rate must
include a specified maximum rate of interest. The Department requires filing of
a description of procedure for changing a variable rate and notifying those
policyowners who have outstanding loans of the rate change, which must be made
on a non-discriminatory basis.
2)
The interest rate charged on a policy loan or the interest rate charged upon
reinstatement of any policy form that was made under a policy issued after
January 1, 1982 will not exceed the rate prescribed in Section 229.5 of the
Code, either as a maximum rate of not more than 8% or an adjustable maximum
interest rate established from time to time by the life insurer as permitted by
law, unless the policyholder agrees in writing to the applicability of those
provisions.
e)
Contestability in Life Policies
The period of contestability shall be determinable from the
policy, i.e., by reference to a specified issue date, policy date or effective
date, as referred to in subsection (t).
f) Limitation of Coverage
Any limitation of coverage in event of death by suicide or
other specified causes must be confined within the contestability period of the
policy to comply with Section 225(l)(c) and (l)(f) of the Code. Exceptions to
this restricted limitation are given in Section 224(l)(c) of the Code and
subsection 1405.40(t)(2) of this Section.
g) Time Limit on Claims
1) Filing of Death Claims - There is no time
limit for filing death claims if the claim is not conditioned upon other
contingencies, i.e., prior disability or accident. Section 224(1)(j) of the
Code requires, when there is a claim on a policy due to the death of the
insured, settlement shall be made upon receipt of due proof of death. For
purposes of this subsection (g)(1), due proof consists of sufficient evidence
to establish in a court a prima facie case for payment of the claim. Therefore,
any limitation with respect to death claims arising during and contingent upon
the insured's continued disability must be limited to a requirement that proof
of disability be furnished within a stipulated period as a condition precedent
to consideration of a death claim.
2) Filing of Disability Claims - Reasonable
limits are permitted. The form may require notification of disability during
lifetime and continuance of disability and may eliminate accrual of benefits
because of any disability that was in existence more than one year prior to
furnishing proof of disability.
h) Participating or Non-Participating
A policy must indicate whether the policy is participating or
non-participating.
i)
Dividend Provisions
The following is applicable to individual policy forms:
1) Disposition of Dividends Left With the
Company - The policy must indicate what disposition will be made of outstanding
dividend credits in event of lapse, termination or maturity of the
policy.
2) Other Dividend Options -
In addition to the dividend options required under Section 224(1)(e) of the
Code, provisions pertaining to the automatic withdrawal of any accumulated
dividends, or current and unapplied dividends for the purpose of paying
premiums unpaid at the end of a grace period, may be included if the policy
provides for the notification of the policyholder of the application of
dividends and the policyholder is given a minimum of 30 days after the date of
the notice within which to direct the insurer to reverse the dividend
transaction.
3) One-Year Term
Insurance Dividend Option - Provision must be made for the disposition of the
value of any one-year term insurance addition in the event of lapse of the
policy. The policy may either provide for application of any cash value of the
remaining one-year term insurance under nonforfeiture options, or a
continuation of the term insurance.
j) Nonforfeiture Values
The nonforfeiture value table must illustrate loan values and
options available for each of the first 20 years of the policy or its term, if
less, and include a provision that, upon request, the company will furnish an
extension of the table. Values and statements in the policy must fulfill the
requirements of Section 229.2 of the Code.
k) Standard Nonforfeiture Law - Paid-up
Insurance Upon Death of Insured (Family Policy)
A spouse or children entitled to paid-up insurance upon the
death of a covered person under a family or parent-child policy shall be given
the right to obtain the net cash surrender value of the paid-up insurance, and
the form shall so state. In lieu of a table of such values, a statement may be
included that a notice of the current values will be furnished by the company
on request, as provided for in Section 229.2(6) of the Code.
l) Inapplicable Language
Inapplicable language is prohibited if the inclusion of that
language results in inconsistencies or ambiguities or is misleading, as is
required by Section 143 of the Code.
m) Back Dating of Life Policy
While the Code prohibits a provision under which any policy
purports to be issued or take effect more than six months before the original
application was made, this limitation is not applicable in conversion from or
exchanges of one form of policy or annuity to or for another form provided
credit is given for the reserve accumulation of the converted or terminated
policy, and the form clearly spells out acceptable provisions relating to
indebtedness, tabular cash values, dividends, effective date, and dividend
accumulations, if any, under the new policy, as is prohibited by Section
225(1)(b) of the Code. The conversion or exchange may not result in the
policyholder being charged for insurance protection that was not
received.
n) Settlement at
Maturity - Commuted Value of Unpaid Installments
The form shall:
1)
provide the basis for determining any commuted value, as is provided for by
Section 224(1)(k) of the Code; and
2) indicate whether benefits at death shall
be payable to an estate or to a named beneficiary.
o) Supplemental Benefits
1) Supplemental Death and Dismemberment
benefits may be added to a life policy when limited to accidental cause
only.
2) Language in such
supplemental benefits that does not employ "result" language, and that
establishes an accidental means test or uses words such as "external",
"violent", or "visible wound" is prohibited. Additionally, contributory
language (e.g., "or indirectly", "wholly or in part", or "contributed to by")
is also prohibited. For purposes of this subsection (o)(2), "result" language
includes, but is not limited to, death as a result of war, death as a result of
suicide and death as a result of flying. For purposes of this subsection
(o)(2), "accidental means test" requires that both the cause and result of the
accident be an accident.
3)
Provisions for loss due to accident or accidental injury shall not contain
language limiting, reducing or excluding liability for a loss resulting from
purely accidental circumstances (e.g., involuntary or unintentional ingestion
of poison or an infectious organism, or inhalation of poisonous gases or fumes)
as provided for by Section 143 of the Code.
4) Other supplemental benefits may be added
to the policy for conditions that result in a total and permanent disability,
as provided by Section 4 of the Code. For purposes of this subsection (o)(4),
"total and permanent disability" means an inability to work and earn money
because of an injury or illness from which recovery is unlikely at any time in
the future and that is expected to continue indefinitely or result in
death.
p) Combination
Life and Accident and Health Coverages in Individual Policies
Life and Accident and Health coverages may be combined in an
individual policy, provided all statutory requirements are met and the form
meets the other tests for approval in Section 143. All individual policies
submitted must contain a premium breakdown as to coverages.
q) Spendthrift and Creditor Clause
The policy may include a Spendthrift and Creditor Clause
providing in substance that, except as may be otherwise provided in the policy,
a Beneficiary may not, at or after the maturity of the policy, assign, transfer
or encumber any benefits payable under the policy and, to the extent permitted
by law, any such benefits shall not be subject to the claims of any creditor of
any Beneficiary. Because of the limitations in the statutory provisions
relating to the exemption from execution, attachment, garnishment or other
process for the debts or liabilities of the insured, no reference to these
statutory exemptions is required as is provided for by Sections 238 and 241 of
the Code.
r) Family Policy -
Names of Spouse and Children
1) It is
necessary to name the spouse and/or children in either the application or
policy only when a separate premium is charged for the individual insured in
either of such categories.
2) For
additional family policy guidelines, refer to 50 Ill. Adm. Code 1403.
s) Term Life Insurance -
Conversion of Term Life Insurance
A form providing term life insurance with conversion rights
without evidence of insurability may not withhold such right of conversion
because the covered person has established a waiver of premium disability
claim. The form may, however, withhold waiver of premium benefits under any new
policy resulting from the conversion, or, as an alternative, reduce the face
amount in the new policy by not exceeding 25% if waiver of premium benefits is
requested and provided in the new policy.
t) Option to Purchase Additional Life
Insurance - Incontestability and Suicide Clause
1) Any new policy issued pursuant to a
purchase option guaranteeing insurability shall provide that the period
specified in the incontestability clause shall expire no later than two years
from the latter of date of issue of the original policy, date of issue of the
rider containing the purchase option, date of change of the original policy
requiring proof of insurability or date of last reinstatement of original
policy, as is provided for by Section 224(1)(c) of the Code.
2) Any new policy issued pursuant to a
purchase option may contain a limitation of coverage with respect to death by
suicide during the period the policy would be contestable in the absence of
issuance under the purchase option, as provided for by subsection
(f).
3) Company shall indicate to
the Department how the incontestability provision of the new policy will be
amended.
4) The request form for
the exercise of a purchase option shall be furnished to the Department. It may
contain medical questions provided it is clearly stated that such questions are
to be answered only if coverages additional to those permitted under the option
are applied for.
u)
Insurable Interest at time of Exercising Option
In a guaranteed purchase option, a provision may not be
included requiring the existence of an insurable interest when the person
exercising the right to purchase is other than the insured.
v) Riders and Endorsements
1) Descriptive Title - Unless the nature of
the rider or endorsement is obvious (e.g., Home Office Endorsement), the form
shall contain a correct descriptive title. Use of words such as "preferred",
"special", "select" or "inflation" is prohibited as provided for by Section 143
of the Code.
2) Effective Date -
Rider or endorsement shall show its effective date, if other than effective
date of policy, either within the text or by reference to a policy provision or
in the schedule of benefits.
3)
Format - Riders and endorsements that are forwarded to the policyowner for
attachment to the policy shall contain the following information:
A) Name of company.
B) Identity of policy and insured, e.g.,
Attached to and made a part of Policy No._____ Insured: __________.
C) Effective date of the rider or
endorsement.
D) Signature of at
least one company official.
4) Reduction of Benefits - If benefits are
reduced, the reduction may be made only pursuant to a signed request or
acceptance of the policy owner.
5)
Riders or endorsements may not be used to amend another rider or
endorsement.