Michigan Administrative Code
Department - Insurance and Financial Services
Insurance
Life Insurance Contracts On Variable Basis
Section R. 500.850 - Variable life insurance policy; mandatory provisions
Current through Vol. 24-04, March 15, 2024
Rule 10. Every variable life insurance policy delivered or issued for delivery in this state shall contain, at a minimum, all of the following:
(a) A cover page or pages corresponding to the cover page of each policy which shall contain all of the following items:
(b) For scheduled premium policies, a provision for a grace period of not less than 31 days from the premium due date, which shall provide that when the premium is paid within the grace period, policy values shall be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.
(c) For scheduled premium policies, a provision that the policy shall be reinstated at any time within 2 years from the date of default, unless the cash surrender value has been paid or the period of extended insurance has expired. Reinstatement shall be upon the written application of the insured with evidence of insurability, including good health, which satisfies the insurer, the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement, and payment of an amount not exceeding the greater of either of the following:
(d) A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy.
(e) A provision designating the separate account to be used and stating all of the following:
(f) For scheduled premium policies, a provision that at any time during the first 18 months of the variable life insurance policy, so long as premiums are duly paid, the owner may exchange the policy for a policy of permanent fixed benefit life insurance on the life of the insured for the same initial amount of insurance as the variable life insurance policy. The insurer shall not require evidence of insurability for this exchange and the new policy shall satisfy all of the following requirements:
(g) A provision that the policy and any papers attached thereto by the insurer, including the application, if attached, constitute the entire insurance contract.
(h) A designation of the officers of the insurer who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his or her behalf, shall be considered as representations and not as warranties.
(i) An identification of the owner of the insurance contract.
(j) A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation.
(k) A statement of any conditions or requirements concerning the assignment of the policy.
(l) A description of any adjustments in policy values to be made in the event of misstatement of the age or sex of the insured.
(m) A provision that the policy shall be incontestable by the insurer after it has been in force for 2 years during the lifetime of the insured.However, any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after any such increase has been in force, during the lifetime of the insured, for 2 years from the date of issue of such increase.
(n) A provision stating that in the event of a material change of investment policy of the separate account, any policyholder who objects to such change shall have the option to convert, without providing evidence of insurability, to a fixed benefit life insurance policy and that the insurer shall give proper notification of the options available to such objecting policyholder. The conversion options shall be equivalent to those provided by R 500.859(5)(b).
(o) A provision that payment of variable death benefits in excess of the minimum death benefits, cash values, policy loans, or partial withdrawals, except when used to pay premiums or partial surrenders, may be deferred as follows:
(p) A description of the basis for computing the cash value and the surrender value under the policy. In scheduled premium policies, such surrender value may be expressed as either of the following:
(q) Premiums or charges for incidental insurance benefits shall be stated separately.
(r) For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the report to policyholders required by R 500.865(d). The death benefit payable during the grace period will equal the death benefit in effect immediately before such period, less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than 3 times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.
(s) If settlement options are provided, at least 1 such option shall be provided on a fixed benefit basis only.
(t) For scheduled premium policies which permit the insurer to adjust premiums, a provision stating the frequency with which premium will be reviewed to determine whether an adjustment should be made. Such frequency shall be at least once every 3 policy years.
(u) The policy shall describe how loans are charged against separate accounts and the effect on such accounts when a loan is made or repaid.
(v) Any other required provisions, including other items currently required for fixed benefit life insurance policies which are not inconsistent with this rule.