(c) Whole life policies with increasing (with
advancing duration) gross premium scale.
(1)
Whole life policy with increasing premium for the purpose of this section means
any fixed premium or indeterminate premium policy subject to this section under
which death proceeds are payable upon death occurring during the insurance
coverage period and which provides an endowment value at any time (most
commonly at the end of the insurance coverage period) and under which the gross
premium increases at least once with advancing duration. The endowment value
cannot be less than 75 percent of the highest scheduled death benefit during
the coverage period.
(2) The policy
gross premium scale cannot provide for grading (increasing) premium beyond
attained age 80. For a joint life last to die policy, the age limitation for
grading premiums shall be based on the age of the youngest joint insured. For a
joint first to die policy, the age limitation for grading premiums shall be
based on the age of the oldest joint insured.
(3) The minimum cash surrender values
required for any policy subject to this subdivision are fixed and determined at
issue in accordance with section
4221 of the
Insurance Law, but treating the policy in divisible parts under a series of
tests as described below:
(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).
(a) Test 1 -- period one uses the death
benefits, endowment benefits, and gross premium scale for the entire period of
coverage measured from issue date to maturity date.
(b) Test 1 -- period two uses the death
benefits, endowment benefits, and gross premium scale for the period of
coverage from the end of the first level gross premium subperiod to the
maturity date.
(c) Test 1 -- period
t uses the death benefits, endowment benefits, and gross premium scale for the
period of coverage from the end of the (t-1) level gross premium subperiod to
the maturity date.
(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:
(a) Appendix III of this Subpart illustrates
the Test 1 cash values for a policy with issue age 50 male, non-smoker class,
final expiry age 95, maturity value at 95 is $1,000, for the initial current
gross premium scale shown. The policy nonforfeiture basis is 1980 CSO
non-smoker without selection factors, age nearest birthdate, curtate functions,
and five percent interest.
(b)
Since period 2 produces the highest values, period 2 values are the required
minimum cash values for the test based upon the initial current gross premium
scale. However, the above testing must be repeated using the guaranteed gross
premium scale. The final values will be the highest of those determined using
the initial current gross premium scale and those determined using the
guaranteed gross premium scale.
(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.