Current through Register Vol. 56, No. 24, December 18, 2024
(a) A basic
illustration shall conform with the following requirements:
1. The illustration shall be labeled with the
date on which it was prepared.
2.
Each page, including any explanatory notes or pages, shall be numbered and show
its relationship to the total number of pages in the illustration (for example,
the fourth page of a seven-page illustration shall be labeled "page 4 of 7
pages").
3. The assumed dates of
payment receipt and benefit pay-out within a policy year shall be clearly
identified.
4. If the age of the
proposed insured is shown as a component of the tabular detail, it shall be
issue age plus the number of years the policy is assumed to have been in
force.
5. The assumed payments on
which the illustrated benefits and values are based shall be identified as
premium outlay or contract premium, as applicable. For policies that do not
require a specific contract premium, the illustrated payments shall be
identified as premium outlay.
6.
Guaranteed death benefits and values available upon surrender, if any, for the
illustrated premium outlay or contract premium shall be shown and clearly
labeled guaranteed. Such guaranteed death benefits and values shall include the
benefits or values of any riders issued on the primary insured.
7. If the illustration shows any
non-guaranteed elements, they cannot be based on a scale more favorable to the
policy owner than the insurer's illustrated scale at any duration. These
elements shall be clearly labeled non-guaranteed.
8. The guaranteed elements, if any, shall be
shown before corresponding non-guaranteed elements and shall be specifically
referred to on any page of an illustration that shows or describes only the
non-guaranteed elements (for example, "see page one for guaranteed
elements").
9. The account or
accumulation value of a policy, if shown, shall be identified by the name this
value is given in the policy being illustrated and shown in close proximity to
the corresponding value available upon surrender.
10. The value available upon surrender shall
be identified by the name this value is given in the policy being illustrated
and shall be the amount available to the policy owner in a lump sum after
deduction of surrender charges, policy loans and policy loan interest, as
applicable.
11. Illustrations may
show policy benefits and values in graphic or chart form in addition to the
tabular form.
12. Any illustration
of non-guaranteed elements shall be accompanied by a statement indicating that:
i. The benefits and values are not
guaranteed;
ii. The assumptions on
which they are based are subject to change by the insurer; and
iii. Actual results may be more or less
favorable.
13. If the
illustration shows that the premium payer may have the option to allow policy
charges to be paid using non-guaranteed values, the illustration must clearly
disclose that a charge continues to be required and that, depending on actual
results, the premium payer may need to continue or resume premium outlays.
Similar disclosure shall be made for premium outlay of lesser amounts or
shorter durations than the contract premium. If a contract premium is due, the
premium outlay display shall not be left blank or show zero unless accompanied
by an asterisk or similar mark to draw attention to the fact that the policy is
not paid up.
14. If the applicant
plans to use dividends or policy values, guaranteed or non-guaranteed, to pay
all or a portion of the contract premium or policy charges, or for any other
purpose, the illustration may reflect those plans and the impact on future
policy benefits and values.
15. An
illustration may be provided under the assumption that policy loans are to be
made. When policy loans are illustrated on a guaranteed basis, interest charged
must be calculated at the highest numerical rate permitted under the terms of
the contract, or, in the case of a contract with a variable rate based on an
index, the current rate being charged.
(b) A basic illustration shall include the
following:
1. A brief description of the
policy being illustrated, including a statement that it is a life insurance
policy;
2. A brief description of
the premium outlay or contract premium, as applicable, for the policy. For a
policy that does not require payment of a specific contract premium, the
illustration shall show the premium outlay that must be paid to guarantee
coverage for the term of the contract, subject to maximum premiums allowable to
qualify as a life insurance policy under the applicable provisions of the
Internal Revenue Code;
3. A brief
description of all policy features, guaranteed or non-guaranteed, shown in the
basic illustration and all riders or options for which premiums are being
charged and the impact they may have on the benefits and values of the
policy;
4. Identification and a
brief definition of column headings and key terms used in the
illustration;
5. A statement
containing in substance the following: "This illustration assumes that the
currently illustrated non-guaranteed elements will continue unchanged for all
years shown. This is not likely to occur, and actual results may be more or
less favorable than those shown"; and
6. If the policy contains a provision for
policy loans, an explanation of how the existence of policy loans would be
expected to affect non-guaranteed elements under the policy.
(c) Following the narrative
summary under (b) above, a basic illustration shall include a numeric summary
of the death benefits and values and the premium outlay and contract premium,
as applicable. For a policy that provides for a contract premium, the
guaranteed death benefits and values shall be based on the contract premium.
This summary shall be shown for at least policy years five, 10 and 20 and at
age 70, if applicable, on the three bases shown below. For multiple life
policies the summary shall show policy years five, 10, 20 and 30. The numeric
summary shall include the following:
1. The
policy guarantees;
2. The insurer's
illustrated scale;
3. The insurer's
illustrated scale used but with the non-guaranteed elements reduced as follows:
i. Dividends at 50 percent of the dividends
contained in the illustrated scale used;
ii. Non-guaranteed credited interest at rates
that are the average of the guaranteed rates and the rates contained in the
illustrated scale used; and
iii.
All non-guaranteed charges, including, but not limited to, term insurance
charges, mortality and expense charges, at rates that are the average of the
guaranteed rates and the rates contained in the illustrated scale used;
and
4. In addition, if
coverage would cease prior to policy maturity or age 100, the year in which
coverage ceases shall be identified for each of the three bases.
(d) The following statements shall
be included on the same page as the numeric summary required under (c) above:
1. A statement to be signed and dated by the
applicant or policy owner, as applicable, reading as follows: "I have received
a copy of this illustration. The agent has told me that any non-guaranteed
elements illustrated are subject to change and could be either higher or lower.
The agent has told me they are not guaranteed"; and
2. A statement to be signed and dated by the
insurance producer or other authorized representative of the insurer reading as
follows: "I certify that this illustration has been presented to the applicant
and that I have explained that any non-guaranteed elements illustrated are
subject to change. I have made no statements that are inconsistent with the
illustration."
(e) A
basic illustration shall include the following tabular detail for at least each
policy year from one to 10 and for every fifth policy year thereafter ending at
age 100, policy maturity or final expiration; and except for term insurance
beyond the 20th year, for any year in which the premium outlay and contact
premium, if applicable, is to change:
1. The
premium outlay and mode the applicant plans to pay and the contract premium, as
applicable;
2. The corresponding
guaranteed death benefit, as provided in the policy;
3. The corresponding guaranteed value
available upon surrender, as provided in the policy;
4. For a policy that provides for a contract
premium, the guaranteed death benefit and value available upon surrender shall
correspond to the contract premium; and
5. Non-guaranteed elements may be shown if
described in the contract. In the case of an illustration for a policy on which
the insurer intends to credit terminal dividends, they may be shown if the
insurer's current practice is to pay terminal dividends. If any non-guaranteed
elements are shown they must be shown at the same durations as the
corresponding guaranteed elements, if any. If no guaranteed benefit or value is
available at any duration for which a non-guaranteed benefit or value is shown,
a zero shall be displayed in the guaranteed column.