New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter III - Policy and Certificate Provisions
Subchapter A - Life, Accident and Health Insurance
Part 42 - Term Life Issuance And Renewal Restrictions; Nonforfeiture Values For Certain Life Insurance Policies
Subpart 42-1 - Term Life Issuance And Renewal Restrictions; Nonforfeiture Values For Certain Life Insurance Policies Issued On Or After November 22, 1995 And Before January 1, 2009
Section 42-1.5 - Minimum guaranteed cash surrender value requirements

(i) policies subject to section 4232 (b) or 4518 of the Insurance Law;

(ii) one year term life insurance coverage funded by dividends or other additional amounts credited to a policy.

(i) The minimum cash surrender value required at each duration is the greater of (a) the greatest of the values determined by each of the following tests using the initial current gross premium scale and (b) the greatest of the values determined by each of the following tests using the guaranteed gross premium scale.

(ii) The policy coverage period is separated into successive subperiods of level gross premiums. These level subperiods are combined into periods for testing (see Appendix I and II).

(iii) For each of the above tests, values are computed as though the policy was issued at the beginning of the particular period being tested with the initial expense allowance based on the attained age at the beginning of such test period.

(iv) The policy should first be tested for each issue age to determine if cash values are needed in accordance with the above test procedures. If it is determined that no cash value (or present value of any paid-up nonforfeiture benefit) at the beginning of any policy year exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year, or the test periods meet the conditions in subparagraph (v) of this paragraph, under any test, then nonforfeiture values are not required for that issue age. Otherwise, nonforfeiture values are required for that issue age. The policy required minimum cash values are determined using the policy defined nonforfeiture mortality table and interest rate basis and using the test plans determined above that produced the highest values.

(v) Policy test periods with level death benefits and with level gross premiums payable over 20 years or less expiring before attained age 71 do not require cash values and do not need to be tested.

(i) Period 1 of Test 1 produces the highest values at each duration, some of which exceed two and one-half percent of the amount of insurance at the beginning of a policy year. The test period does not meet the requirement of subparagraph (2)(v) of this subdivision. Therefore, for this test, cash values will be required treating the plan as a period 1 plan, using the policy defined nonforfeiture mortality table and interest rate.

(ii) Test 2 values in this example use start age 80 (65 + 15) and are shown in Appendix II of this Subpart. None of these Test 2 periods' values exceeds two and one-half percent of the amount of insurance at the beginning of a policy year. Therefore, using Test 2 no period values are needed. If any value exceeded two and one-half percent of the amount of insurance at the beginning of a policy year, then values based on such plan period, to the extent they exceeded the values under Test 1, will be required.

(iii) Test 3 and subsequent tests continue the process until the mandatory expiry date of the policy. In the example, no further cash values develop.

(iv) The above testing then must be repeated using the guaranteed gross premium scale.

(v) If the values using the guaranteed gross premium scale are less than those using the initial current gross premium scale, it would be determined that the minimum cash values are those noted above at the end of Test 1, for period one, on the initial current gross premium scale.

(i) The minimum cash values required are the greater of (a) the greatest of the values determined by each of the following Test 1 periods using the initial current gross premium scale and (b) the greatest of the values determined by each of the following Test 1 periods using the guaranteed gross premium scale.

(ii) The policy coverage period is separated into successive subperiods of level gross premiums. These level subperiods are combined into periods for testing (see Appendix III).

(iii) For each of the above tests, values are computed as though the policy was issued at the beginning of the particular period being tested with the initial expense allowance based on the attained age at the beginning of such test period.

(iv) All level gross premium subperiods should be tested. The required minimum nonforfeiture cash values are determined using the above test plans and the policy defined nonforfeiture mortality table and interest rate basis.

(v) Example:

(vi) If the highest values at each duration are based upon a single period test, such values shall be deemed in compliance with this Subpart. If the highest values at each duration are based on more than a single period test, the insurer must also demonstrate that such cash value structure is fair, equitable and not misleading.