Current through Register Vol. 48, No. 12, March 22, 2024
a) The following
methodology shall be used in the determination of minimum cash surrender values
for policies subject to this Part in accordance with the requirements of
Section 229.2 of the Insurance Code (Standard Nonforfeiture Law for Life
Insurance) [215 ILCS
5/229.2 ].
1) The
endowment period shall be that period of time measured from the issue date of
the policy to the date when the endowment benefit becomes payable (the
endowment date) under the terms of the policy.
2) If the endowment benefit is added by rider
to a policy, then, for minimum cash value determination purposes, the base
policy and the endowment benefit are to be treated as integrated.
3) Premiums under the policy may be provided
through a scale of guaranteed rates for the term of the policy or through a
scale of current rates that are subject to a scale of guaranteed maximum
premiums; if rates are subject to a scale of guaranteed maximum premiums, the
minimum cash values shall be the greater of those produced under this Part
using the guaranteed maximum rates and current rate scale applicable at issue
of the policy.
4) Any cash
surrender value available under the policy in the event of default in a premium
payment due on any policy anniversary during the endowment period shall be an
amount not less than the excess, if any, of the present value, on the
anniversary, of the endowment benefit and any future incremental death benefits
during the endowment period that would have been provided for by the policy if
there had been no default, over the sum of:
A)
The then present value of the adjusted premiums as defined in subsection (a)(6)
corresponding to premiums that would have fallen due on and after the
anniversary during the endowment period; and
B) The amount of any indebtedness to the
company on the policy.
5) Incremental death benefits are death
benefits during the endowment period in excess of the lowest death benefit
provided under the policy during the endowment period.
6) The adjusted premiums for the policy shall
be calculated on an annual basis and shall be the uniform percentage of the
respective premiums specified in the policy for each policy year during the
endowment period. Amounts payable as extra premiums to cover impairments or
special hazards shall be excluded, as shall 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. The
present value, at the date of issue of the policy, of all adjusted premiums
shall be equal to the sum of:
A) The present
value of the endowment benefit and any incremental death benefits provided for
by the policy during the endowment period;
B) 1% of the average amount of insurance
(total death benefit under the policy, including any incremental death
benefits) at the beginning of each of the first 10 policy years; and
C) 125% of the nonforfeiture net level
premium, as defined in subsection (a)(7); provided, however, that no
nonforfeiture net level premium shall be considered to exceed 4% of the average
amount of insurance (total death benefit under the policy, including any
incremental death benefits) at the beginning of each of the first 10 policy
years.
7) The
nonforfeiture net level premium for the policy shall be equal to the present
value, at the date of issue of the policy, of the endowment benefit and any
incremental death benefits provided for by the policy during the endowment
period, divided by the present value, at the date of issue of the policy, of an
annual annuity of one payable on the date of issue of the policy and on each
anniversary of the policy on which a premium falls due prior to the endowment
date.
8) The mortality rates and
interest rate used in the determination of the minimum cash values for the
policy shall be those applicable under Section 229.2 of the Insurance Code,
taking into account guaranteed benefits and premiums (whether guaranteed or
indeterminate) during the entire period death benefits are guaranteed available
under the policy, provided required premiums are paid.
b) In no event can the cash surrender value
under the policy at any duration be less than the greater of:
1) The minimum cash value calculated
according to Section
1415.30(a)
of this Part; and
2) The minimum
cash value at the same duration resulting from the application of the methods
described in Section 229.2(3) and (4c) of the Code, taking into account
guaranteed benefits and premiums (whether guaranteed or indeterminate) during
the entire period death benefits are guaranteed available under the policy,
provided required premiums are paid. In performing this calculation, no annual
premium at any duration after the endowment period shall exceed the difference
between the death benefit and the cash value at that duration.
c) The cash surrender values for
the policy must also satisfy the consistency of progression of cash values test
contained in Section 229.2(7) of the Code, taking into account guaranteed
benefits and premiums (whether guaranteed or indeterminate) during the entire
period death benefits are guaranteed available under the policy, provided
required premiums are paid.
d) For
policies in which the benefit is defined in more general terms as providing for
a return of premiums paid or a portion of premiums paid, the procedures of
Section 229.2(4c)(c) of the Code and the requirements of Section
1415.30(a)
of this Part shall be applied in the determination of a revised set of minimum
cash values in the event the value of the endowment benefit of the policy
changes due to a change made to the premium schedule provided when the policy
was issued.