Current through Register Vol. 46, No. 39, September 25, 2024
(a)
Format.
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 (e.g., 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 the 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.
(7) If the illustration
shows any non-guaranteed elements, they cannot be based on a scale more
favorable to the policyowner 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 (e.g., "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 the value is given in the policy being illustrated
and shall be the amount available to the policyowner 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.
(b)
Narrative summary.
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 any policy features, riders or options, guaranteed or
non-guaranteed, shown in the basic illustration 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; and
(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."
(c)
Numeric summary.
(1) Following
the narrative summary, 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. Except as
provided in subdivision (g) of this section, this summary shall be shown for at
least policy years 5, 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 5, 10, 20 and 30. The three bases are as follows:
(i) policy guarantees;
(ii) insurer's illustrated scale;
(iii) insurer's illustrated scale used but
with the non-guaranteed elements reduced as follows:
(a) dividends at 50 percent of the dividends
contained in the illustrated scale used;
(b) non-guaranteed credited interest at rates
that are the average of the guaranteed rates and the rates contained in the
illustrated scale used; and
(c) 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
(d) 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)
Statements.
Statements substantially similar to the following shall
be included on the same page as the numeric summary and signed by the
applicant, or the policyowner in the case of an illustration provided at time
of delivery, as required in this Subpart.
(1) A statement to be signed and dated by the
applicant or policyowner reading as follows: "I have received a copy of this
illustration and understand that any non-guaranteed elements illustrated are
subject to change and could be either higher or lower. The agent or broker has
told me they are not guaranteed."
(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)
Tabular detail.
(1) A basic
illustration shall include the following for at least each policy year from one
to ten 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 contract premium, if
applicable, is to change:
(i) the premium
outlay and mode the applicant plans to pay and the contract premium, as
applicable;
(ii) the corresponding
guaranteed death benefit, as provided in the policy; and
(iii) the corresponding guaranteed value
available upon surrender, as provided in the policy.
(2) For a policy that provides for a contract
premium, the guaranteed death benefit and value available upon surrender shall
correspond to the contract premium.
(3) Non-guaranteed elements may be shown if
described in the policy. 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 shall 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.
(f) An illustration for a policy that has a
contract premium and which shows a premium outlay based on current or median
policy cost factors or current or median dividend scales which permits a
suspension of premium payments prior to the maturity or final expiration date
shall be presented only in conjunction with another illustration setting forth
a continuous premium payment pattern based on current, median and guaranteed
policy cost factors or based on current, median and zero dividend scales for
the contract premium. As one alternative, an insurer may utilize a single basic
illustration showing a suspension of premium if the numeric summary shows
premium payments payable to a specific policy year on a current, median and
guaranteed basis. As a second alternative, the insurer may use a single basic
illustration depicting the full contract premium being paid for the period
required under the policy with both a full pay and abbreviated- pay values
included in the numeric summary. As a third alternative, an insurer may elect
to use a disclosure document, in conjunction with the supplemental
illustration, to be signed by the agent or broker and the applicant, which
explains in narrative form that: the requirements to pay policy premiums are
not canceled, forgiven or waived; the operation of the suspension of premiums
is contingent upon current non-guaranteed factors remaining unchanged, which
may or may not occur; a brief description of the factors; and hypothetical
examples for issue age 50 with reduction in the current non-guaranteed factors
of 25 percent and 50 percent as well as an example which shows the need to
continue premium payments in order to maintain the policy in force beyond the
illustrated premium suspension date. In addition, the insurer shall provide
with any illustration showing a suspension of premium:
(1) a statement displayed in a prominent
manner that this illustration is not for a paid-up policy or a guaranteed
limited premium payment policy;
(2)
for a fixed premium policy subject to section
4232
(b) of the Insurance Law, disclosure that the
policy, after suspension, continues to require monthly cost of insurance and
expense charges, and interest credits, but any changes in current policy cost
factors may result in a need to continue premium payments or to resume premium
payments, which may be greater than the initial annual premium; or
(3) for a participating policy, disclosure
that future dividends may be less than those illustrated which may result in
the need to continue premium payments or resume premium payments after an
initial suspension of such premium payments.
(g) The numeric summary for a policy subject
to section
4232
(b) of the Insurance Law and a cash value
policy providing three basic components consisting of a base policy, a paid-up
additions element and a term insurance element shall show, in addition to the
policy durations set forth in subdivision (c) of this section, policy duration
at age 85 and age 90 of the insured.
(h) An illustration for a joint and last
survivor policy which, if applicable, provides for an adjustment in cash value
on the first death shall assume that death occurs at the later of age 75 of the
older insured or 10 years from the issue date of the policy. Otherwise, an
illustration for a joint and last survivor policy for the purposes of the basic
illustration, including the numeric summary, may use the younger age or the
older age.
(i)
Pension
maximization.
(1) All illustrations of
a life insurance policy with the use of life insurance proceeds to purchase a
single premium immediate annuity in order to maximize periodic annuity income
payments under a qualified or non-qualified employee welfare benefit plan as
defined under the Employee Retirement Income Security Act of 1974 shall contain
the following information:
(i) in addition to
the information required for the life insurance policy by this Subpart, such
illustration shall state the monthly annuity income for a life annuity option
on both a current annuity purchase rate basis and on the guaranteed annuity
purchase rate basis set forth in the life insurance policy;
(ii) the assumed date of death under the life
policy for illustration purposes shall be the later of the 10th policy
anniversary or the policy year that the proposed insured attains age
75;
(iii) such illustration shall
prominently state that any annuity income amount is not guaranteed;
(iv) such illustration shall prominently
disclose that the amounts of actual annuity income depends on the amount of
life insurance proceeds applied towards the purchase of the annuity, the date
of death of the insured, the annuity option selected and the annuity purchase
rate which is based upon prevailing interest rates and life expectancy of the
annuitant/beneficiary; and
(v) such
illustration shall state that the plan depends upon the life insurance policy
being maintained to the date of death of the insured at a premium that may not
be guaranteed.
(2) If the
life insurance policy does not provide guaranteed annuity income optional
settlement purchase rates, such illustration shall provide in addition to any
current single premium annuity purchase rates, a hypothetical purchase rate
based upon three percent interest and the 1983 annuity mortality
table.
(3) The sales illustration
summary required for the life insurance policy by this Subpart shall be
appropriately modified to disclose the amount of monthly annuity income as
determined above and appropriately captioned "not guaranteed."
(4) All illustrations shall use a monthly
life annuity income option.
