Current through Register Vol. 56, No. 6, March
18, 2024
(a) This
section does not apply to life insurance policies, annuity contracts, or riders
providing long-term care benefits only through acceleration of life or annuity
benefits. Such life insurance policies, annuity contracts, or riders must have
nonforfeiture benefits that comply with
N.J.S.A.
17B:25-19 or
17B:25-20, as
applicable.
(b) To comply with the
requirement to offer a nonforfeiture benefit pursuant to
N.J.S.A.
17B:27E-8:
1. A policy or certificate offered with
nonforfeiture benefits shall have coverage elements, eligibility, benefit
triggers and benefit length that are the same as coverage to be issued without
nonforfeiture benefits. The additional charge for the nonforfeiture benefit
shall be reasonable in relation to the cost of providing the benefit. The
nonforfeiture benefit included in the offer shall meet the requirements in (d)
below; and
2. The offer shall be in
writing if the nonforfeiture benefits are not otherwise described in the
Outline of Coverage or other materials given to the prospective
policyholders.
(c) If
the offer required to be made under
N.J.S.A.
17B:27E-8 is rejected, individual and group
policies may be issued without nonforfeiture benefits but must contain a
contingent benefit upon lapse.
1. If a group
policyholder elects to make the nonforfeiture benefit an option to the
certificate holder, a certificate of coverage under a group policy shall
provide either the nonforfeiture benefit if such benefit is elected by the
certificate holder, or the contingent benefit upon lapse if the nonforfeiture
benefit is not elected by the certificate holder.
2. The contingent benefit on lapse for an
individual policy or group certificate shall be triggered every time a carrier
increases the premium rates to a level which results in a cumulative increase
of the annual premium equal to or exceeding the percentage of the insured's
initial annual premium set forth below based on the insured's issue age, and
the policy or certificate lapses within 120 days of the due date of the premium
so increased. Unless otherwise required, a policyholder or certificate holder
shall be notified at least 30 days prior to the due date of the premium
reflecting the rate increase.
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3. On or before the effective date of a
substantial premium increase as defined in (c)2 above, the carrier shall do all
of the following:
i. Offer to reduce policy
benefits provided by the current coverage without the requirement of additional
underwriting so that required premium payments are not increased. This
reduction shall bear a reasonable relationship to the premium increase
otherwise required and shall not impair any other contractual option to reduce
benefits;
ii. Offer to convert the
coverage to a paid-up status with a shortened benefit period in accordance with
the terms of (d) below. This option may be elected at any time during the
120-day period referenced in (c)2 above; and
iii. Notify the policyholder or certificate
holder that a default or lapse at any time during the 120-day period referenced
in (c)2 above shall be deemed to be the election of the offer to convert in
(c)3ii above.
(d) Benefits continued as nonforfeiture
benefits, including contingent benefits upon lapse, are described in this
subsection:
1. For purposes of this
subsection, attained age rating is defined as a schedule of premium starting
from the issue date which increases with age at least one percent per year
prior to age 50, and at least three percent per year beyond age 50.
2. For the purposes of this subsection, the
nonforfeiture benefit shall be of a shortened benefit period providing paid-up
long-term care insurance coverage after lapse. The same benefits (amounts and
frequency in effect at the time of lapse but not increased thereafter) will be
payable for a qualifying claim, but the lifetime maximum dollars or days of
benefits shall be determined as specified in (d)3 below.
3. The standard nonforfeiture credit will be
equal to 100 percent of the sum of all premiums paid, including the premiums
paid prior to any changes in benefits, less any claims paid. The carrier may
offer additional shortened benefit period options, as long as the benefits for
each duration equal or exceed the standard nonforfeiture credit for the
duration. However, the minimum nonforfeiture credit shall not be less than 30
times the daily nursing home benefit at the time of lapse. In either event, the
calculation of the nonforfeiture credit is subject to the limitation of (e)
below.
4. The nonforfeiture benefit
shall begin not later than the end of the third year following the policy or
certificate issue date. The contingent benefit upon lapse shall be effective
during the first three years as well as thereafter. However, for a policy or
certificate with attained age rating, the nonforfeiture benefit shall begin on
the earlier of:
i. The end of the 10th year
following the policy or certificate issue date; or
ii. The end of the second year following the
date the policy or certificate is no longer subject to attained age
rating.
5. Nonforfeiture
credits may be used for all care and services qualifying for benefits under the
terms of the policy or certificate, up to the limits specified in the policy or
certificate.
(e) All
benefits paid by the carrier while the policy or certificate is in premium
paying status and in the paid up status will not exceed the maximum benefits
that would be payable if the policy or certificate had remained in premium
paying status.
(f) There shall be
no difference in the minimum nonforfeiture benefits as required under this
section for group and individual policies.
(g) The provisions of this section apply to
any long-term care policy issued in this State on or after January 18, 2006.
However, this section does not apply to certificates issued under a group
long-term care insurance policy that was in force at the time this provision
became effective.
(h) Premiums
charged for a policy or certificate containing nonforfeiture benefits or a
contingent benefit on lapse shall be subject to the loss ratio requirements of
N.J.A.C.
11:4-34.1 7 and 34.18 treating the policy as
a whole.
(i) To determine whether
contingent nonforfeiture upon lapse provisions are triggered under (c)2 above,
a replacing carrier that purchased or otherwise assumed a block or blocks of
long-term care insurance policies from another carrier shall calculate the
percentage increase based on the initial annual premium paid by the insured
when the policy was first purchased from the original carrier.
(j) A nonforfeiture benefit for qualified
long-term care insurance contracts that are level premium contracts shall be
offered that meets the following requirements:
1. The nonforfeiture provision shall be
appropriately captioned;
2. The
nonforfeiture provision shall provide a benefit available in the event of a
default in the payment of any premiums and shall state that the amount of the
benefit may be adjusted subsequent to being initially granted only as necessary
to reflect changes in claims, persistency and interest as reflected in changes
in rates for premium paying contracts approved by the Commissioner for the same
contract form; and
3. The
nonforfeiture provision shall provide at least one of the following:
i. Reduced paid-up insurance;
ii. Extended term insurance;
iii. Shortened benefit period; and
iv. Other similar offerings approved by the
Commissioner.
(k) Every policy with a premium payment
period less than the term of eligibility for benefits under the policy shall
provide a reduced paid up benefit upon lapse. The benefit shall be provided
after five years or, in the case of a premium payment period of less than 10
years, after half of the premium payment period.
1. The amount of the reduced paid up benefit
will be the policy benefit times the ratio of the number of premiums paid under
the policy and the number of required premium payments.
2. The coverage period, benefit period, and
all other requirements will be the same for the reduced paid-up
benefit.
