§431:10H-233 Nonforfeiture benefit
requirement. (a) This section does not apply to life insurance policies
containing accelerated long-term care benefits.
(b) To comply with the requirement to offer a
nonforfeiture benefit pursuant to section 431:10H-116, the following shall be
met:
(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 nonforfeiture benefit included in the offer shall
be the benefit described in subsection (j); and
(2) The offer shall be in writing if the
nonforfeiture benefit is not otherwise described in the outline of coverage or
other materials given to the prospective policyholder.
(c) If the offer required to be made under
section 431:10H-116 is rejected, the insurer shall provide the contingent
benefit upon lapse described in this section. Even if this offer is accepted
for a policy with a fixed or limited premium paying period, the contingent
benefit on lapse in subsection (g) shall still apply.
(d) After rejection of the offer required
under section 431:10H-116, for individual and group policies without
nonforfeiture benefits issued after June 30, 2000, the insurer shall provide a
contingent benefit upon lapse.
(e) If a group policyholder elects to make the
nonforfeiture benefit an option to the certificate holder, a certificate shall
provide either the nonforfeiture benefit or the contingent benefit upon lapse.
(f) The contingent benefit on lapse shall be
triggered every time an insurer 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 in the table
below based on the insured's issue age, and the policy or certificate lapses
within one hundred twenty days of the due date of the premium so increased.
Unless otherwise required, policyholders and certificate holders shall be
notified at least thirty days prior to the due date of the premium reflecting
the rate increase.
Triggers for a
Substantial Premium Increase
Per Cent
Increase Over
Issue Age Initial
Premium
29 and under 200%
30-34 190%
35-39 170%
40-44 150%
45-49 130%
50-54 110%
55-59 90%
60 70%
61 66%
62 62%
63 58%
64 54%
65 50%
66 48%
67 46%
68 44%
69 42%
70 40%
71 38%
72 36%
73 34%
74 32%
75 30%
76 28%
77 26%
78 24%
79 22%
80 20%
81 19%
82 18%
83 17%
84 16%
85 15%
86 14%
87 13%
88 12%
89 11%
90 and over 10%
(g) A contingent benefit on lapse shall also
be triggered for policies with a fixed or limited premium paying period every
time an insurer increases the premium rates to a level that 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, the policy or certificate lapses within one hundred and twenty days
of the due date of the premium so increased, and the ratio in subsection (i)(2)
is forty per cent or more. Unless otherwise required, policyholders shall be
notified at least thirty days prior to the due date of the premium reflecting
the rate increase.
Triggers for a
Substantial Premium Increase
Per Cent Increase Over
Issue Age Initial
Premium
Under 65 50%
65-80 30%
Over 80 10%
This provision shall be in addition
to the contingent benefit provided by subsection (f) and where both are
triggered, the benefit provided shall be at the option of the insured.
(h) On or before the effective date of a
substantial premium increase as defined in subsection (f), the insurer shall:
(1) Offer to reduce policy benefits provided by the
current coverage without the requirement of additional underwriting so that
required premium payments are not increased;
(2) Offer to convert the coverage to a paid-up status
with a shortened benefit period in accordance with the terms of subsection
(j). This option may be elected at any time during the one-hundred-twenty-day
period referenced in subsection (f); and
(3) Notify the policyholder or certificate holder
that a default or lapse at any time during the one-hundred-twenty-day period
under subsection (f) shall be deemed to be the election offer to convert in
paragraph (2), unless the automatic option in subsection (i)(3) applies.
(i) On or before the effective date of a
substantial premium increase as defined in subsection (g) above, the insurer
shall:
(1) Offer to reduce policy benefits provided by the
current coverage without the requirement of additional underwriting so that
required premium payments are not increased;
(2) Offer to convert the coverage to a paid-up status
where the amount payable for each benefit is ninety per cent of the amount
payable in effect immediately prior to lapse times the ratio of the number of
completed months of paid premiums divided by the number of months in the
premium paying period. This option may be elected at any time during the
one-hundred-twenty-day period referenced in subsection (g); and
(3) Notify the policyholder or certificate holder
that a default or lapse at any time during the one-hundred-twenty-day period
referenced in subsection (g) shall be deemed to be the election of the offer to
convert in paragraph (2) if the ratio is forty per cent or more.
(j) Benefits continued as nonforfeiture
benefits, including contingent benefits upon lapse in accordance with
subsection (f) but not (g), are described in this subsection, as follows:
(1) For purposes of this subsection, attained age
rating is defined as a schedule of premiums starting from the issue date which
increases age at least one per cent per year prior to age fifty, and at least
three per cent per year beyond age fifty;
(2) For 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) shall be
payable for a qualifying claim, but the lifetime maximum dollars or days of
benefits shall be determined as provided in paragraph (3);
(3) The standard nonforfeiture credit shall be equal
to one hundred per cent of the sum of all premiums paid, including the premiums
paid prior to any changes in benefits. The insurer may offer additional
shortened benefit period options, as long as the benefits for each duration
equal or exceed the standard forfeiture credit for that duration. However, the
minimum nonforfeiture credit shall not be less than thirty 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 subsection (k);
(4) The nonforfeiture benefit shall begin not later
than the end of the third year following the policy or certificate issue date;
provided that the contingent benefit upon lapse shall be effective during the
first three years and thereafter;
(5) Notwithstanding the provisions in paragraph (4),
for a policy or certificate with attained age rating, the nonforfeiture benefit
shall begin on the earlier of:
(A) The end of the tenth year following the
policy or certificate issue date; or
(B) The end of the second year following the
date the policy or certificate is no longer subject to attained age rating; and
(6) 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.
(k) All benefits paid by the insurer while the
policy or certificate is in premium paying status and in paid up status shall
not exceed the maximum benefits which would be payable if the policy or
certificate had remained in premium paying status.
(l) There shall be no difference in the
minimum nonforfeiture benefits as required under this section for group and
individual policies.
(m) The requirements set forth in this section
shall become effective July 1, 2000, and shall apply as follows:
(1) This section shall apply to any long-term care
policy issued in this State after June 30, 2000; and
(2) For certificates issued after June 30, 2000,
under a group long-term care insurance policy as defined in paragraph (1) under
the definition of "group long-term care insurance" in section
431:10H-104, which policy was in force on July 1, 2000, this section shall not
apply;
provided that the provisions in subsections (c),
(g), and (i) that pertain to contingent benefits for a policy with a fixed or
limited premium paying period shall apply to any long-term care insurance
policy or certificate issued in the State after December 31, 2007; provided
further that for new certificates on a group policy as defined in section
431:10H-104, the provisions in subsections (c), (g), and (i) that pertain to
contingent benefits for a policy with a fixed or limited premium paying period
shall apply after July 1, 2008.
(n) Premiums charged for a policy or
certificate containing nonforfeiture benefits or contingent benefit on lapse
shall be subject to the loss ratio requirements of section 431:10H-207.5 or
431:10H-226, whichever is applicable, treating
the policy as a whole.
(o) To determine whether contingent
nonforfeiture upon lapse provisions are triggered under subsection (f) or (g),
a replacing insurer that purchased or otherwise assumed a block or blocks of
long-term care insurance policies from another insurer shall calculate the
percentage increase based on the initial annual premium paid by the insured
when the policy was first purchased from the original insurer.
(p) 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:
(A) Reduced paid-up insurance;
(B) Extended term insurance;
(C) Shortened benefit period; or
(D) Other similar offerings approved by the
commissioner. [L 1999, c 93, pt of §2; am L 2007, c 233, §24; am L 2009, c 49,
§4]
