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The Vermont Statutes Online
Title
08
:
Banking and Insurance
Chapter
103
:
LIFE INSURANCE POLICIES AND ANNUITY CONTRACTS
Subchapter
003B
:
STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE
§
3768. Calculations of adjusted premiums by the nonforfeiture net level premium
method
(a)(1) This
section shall apply to all policies issued on or after the operative date of
this section. Except as provided in subsection (g) of this section. the adjusted
premiums for any policy shall be calculated on an annual basis and shall be
such uniform percentage of the respective premiums specified in the policy for
each policy year, excluding amounts payable as extra premiums to cover
impairments or special hazards and also excluding any uniform annual contract
charge or policy fee specified in the policy in a statement of the method to be
used in calculating the cash surrender values and paid-up nonforfeiture
benefits, that the present value, at the date of issue of the policy, of all
adjusted premiums shall be equal to the sum of:
(A) the then
present value of the future guaranteed benefits provided for by the policy;
(B) one percent
of either the amount of insurance, if the insurance be uniform in amount, or
the average amount of insurance at the beginning of each of the first 10 policy
years; and
(C) 125 percent
of the nonforfeiture net level premium as defined in this section.
(2) In applying
the percentage specified in subdivision (1)(C) of this subsection, no
nonforfeiture net level premium shall be deemed to exceed four percent of
either the amount of insurance, if the insurance be uniform in amount, or the
average amount of insurance at the beginning of each of the first 10 policy
years. The date of issue of a policy for the purpose of this section shall be
the date as of which the rated age of the insured is determined.
(b) The
nonforfeiture net level premium shall be equal to the present value, at the
date of issue of the policy, of the guaranteed benefits provided for by the
policy divided by the present value, at the date of issue of the policy, of an
annuity of one per annum payable on the date of issue of the policy and on each
anniversary of the policy on which a premium falls due.
(c) In the case
of policies which cause, on a basis guaranteed in the policy, unscheduled
changes in benefits or premiums, or which provide an option for changes in
benefits or premiums, other than a change to a new policy, the adjusted
premiums and present values shall be calculated initially on the assumption
that future benefits and premiums do not change from those stipulated at the
date of issue of the policy. At the time of any change in the benefits or
premiums, the future adjusted premiums, nonforfeiture net level premiums and
present values shall be recalculated on the assumption that future benefits and
premiums do not change from those stipulated by the policy immediately after
the change.
(d) Except as
otherwise provided in subsection (g) of this section, the recalculated future
adjusted premiums for any policy shall be the uniform percentage of the
respective future premiums specified in the policy for each policy year,
excluding amounts payable as extra premiums to cover impairments and special
hazards, and also excluding any uniform annual contract charge or policy fee
specified in the policy in a statement of the method to be used in calculating
the cash surrender values and paid-up nonforfeiture benefits, that the present
value, at the time of change to the newly defined benefits or premiums, of all
such future adjusted premiums shall be equal to the excess of:
(1) The sum of:
(A) the then
present value of the then future guaranteed benefits provided for by the
policy, and
(B) the
additional expense allowance, if any, over
(2) the then
cash surrender value, if any, or present value of any paid-up nonforfeiture
benefit under this policy.
(e) The
additional expense allowance, at the time of the change to the newly defined
benefits or premiums, shall be the sum of:
(1) One percent
of the excess, if positive, of the average amount of insurance at the beginning
of each of the first 10 policy years subsequent to the change over the average
amount of insurance prior to the change at the beginning of each of the first 10
policy years subsequent to the time of the most recent previous change, or, if
there has been no previous change, the date of issue of the policy; and
(2) 125 percent
of the increase, if positive, in the nonforfeiture net level premium.
(f) The recalculated
nonforfeiture net level premium shall be equal to the result obtained by
dividing the sum arrived at under subdivision (1) of this subsection by the
value specified in subdivision (2) of this subsection.
(1) As used in
this subsection, "sum" means:
(A) the
nonforfeiture net level premium applicable prior to the change times the
present value of an annuity of one per annum payable on each anniversary of the
policy on or subsequent to the date of the change on which a premium would have
fallen due had the change not occurred, plus
(B) the present
value of the increase in future guaranteed benefits provided for by the policy.
(2) As used in
this subsection, "value" means the present value of an annuity of one
per annum payable on each anniversary of the policy on or subsequent to the
date of change on which a premium falls due.
(g)
Notwithstanding any other provisions of this section to the contrary, in the
case of a policy issued on a substandard basis which provides reduced graded
amounts of insurance so that, in each policy year, the policy has the same
tabular mortality cost as an otherwise similar policy issued on the standard
basis which provides higher uniform amount of insurance, adjusted premiums and
present values for the substandard policy may be calculated as if it were
issued to provide higher uniform amounts of insurance on the standard basis.
(h) All adjusted
premiums and present values referred to in this subchapter shall for all
policies of ordinary insurance be calculated on the basis of the Commissioners'
1980 Standard Ordinary Mortality Table or, at the election of the company, for
any one or more specified plans of life insurance, the Commissioners' 1980
Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, shall
for all policies of industrial insurance be calculated on the basis of the
Commissioners' 1961 Standard Industrial Mortality Table, and shall for all
policies issued in a particular calendar year be calculated on the basis of a
rate of interest not exceeding the nonforfeiture interest rate as defined in
this section, for policies issued in that calendar year, provided that:
(1) At the
option of the company, calculations for all policies issued in a particular
calendar year may be made on the basis of a rate of interest not exceeding the
nonforfeiture interest rate, as defined in this section, for policies issued in
the immediately preceding calendar year.
(2) Under a
paid-up nonforfeiture benefit, including any paid-up dividend additions, any
cash surrender value available, whether or not required by section 3762 of this
subchapter, shall be calculated on the basis of the mortality table and rate of
interest used in determining the amount of such paid-up nonforfeiture benefit
and paid-up dividend additions, if any.
(3) A company
may calculate the amount of any guaranteed paid-up nonforfeiture benefit
including any paid-up additions under the policy on the basis of an interest
rate no lower than that specified in the policy for calculating cash surrender
values.
(4) In
calculating the present value of any paid-up term insurance with accompanying
pure endowment, if any, offered as a nonforfeiture benefit, the rates of
mortality assumed may be not more than those shown in the Commissioners' 1980
Extended Term Insurance Table for policies of ordinary insurance and not more
than the Commissioners' 1961 Industrial Extended Term Insurance Table for
policies of industrial insurance.
(5) For
insurance issued on a substandard basis, the calculation of any adjusted
premiums and present values may be based on appropriate modifications of the
aforementioned tables.
(6)(A) For
policies issued prior to the operative date of the Valuation Manual defined in
subchapter 4a or this chapter, any Commissioners' Standard Ordinary Mortality Tables,
adopted after 1980 by the National Association of Insurance Commissioners,
approved by rule adopted by the Commissioner for use in determining the minimum
nonforfeiture standard may be substituted for the Commissioners' 1980 Standard
Ordinary Mortality Table with or without 10-Year Select Mortality Factors or
for the Commissioners' 1980 Extended Term Insurance Table.
(B) For policies
issued on or after the operative date of the Valuation Manual the Valuation
Manual shall provide the Commissioners' Standard Mortality Table for use in
determining the minimum nonforfeiture standard that may be substituted for the
Commissioners' 1980 Standard Ordinary Mortality Table with or without 10-Year
Select Mortality Factors or for the Commissioners' 1980 Extended Term Insurance
Table. If the Commissioner adopts by rule a Commissioners' Standard Ordinary
Mortality Table adopted by the NAIC for use in determining the minimum
nonforfeiture standard for policies issued on or after the operative date of
the Valuation Manual then that minimum nonforfeiture standard supersedes the
minimum nonforfeiture standard provided by the Valuation Manual.
(7)(A) For
policies issued prior to the operative date of the Valuation Manual, any
Commissioners' Standard Industrial Mortality Tables, adopted after 1980 by the
NAIC, approved by rule adopted by the Commissioner for use in determining the
minimum nonforfeiture standard may be substituted for the Commissioners' 1961
Standard Industrial Mortality Table or the Commissioners' 1961 Industrial
Extended Term Insurance Table.
(B) For policies
issued on or after the operative date of the Valuation Manual the Valuation
Manual shall provide the Commissioners' Standard Mortality Table for use in
determining the minimum nonforfeiture standard that may be substituted for the
Commissioners' 1961 Standard Industrial Mortality Table or the Commissioners'
1961 Industrial Extended Term Insurance Table. If the Commissioner adopts by
rule a Commissioners' Standard Industrial Mortality Table adopted by the NAIC
for use in determining the minimum nonforfeiture standard for policies issued
on or after the operative date of the Valuation Manual then that minimum
nonforfeiture standard supersedes the minimum nonforfeiture standard provided
by the Valuation Manual.
(i) The
nonforfeiture interest rate is defined as follows:
(1) For policies
issued prior to the operative date of the Valuation Manual, the nonforfeiture
interest rate per annum for any policy issued in a particular calendar year
shall be equal to 125 percent of the calendar year statutory valuation interest
rate for such policy as defined under subchapter 4a of this chapter, rounded to
the nearer one quarter of one percent, provided the nonforfeiture interest rate
shall not be less than four percent.
(2) For policies
issued on and after the operative date of the Valuation Manual, the
nonforfeiture interest rate per annum for any policy issued in a particular
calendar year shall be provided by the Valuation Manual.
(j)
Notwithstanding any other provision of law to the contrary, any refiling of
nonforfeiture values or their methods of computation for any previously
approved policy form which involves only a change in the interest rate or
mortality table used to compute nonforfeiture values shall not require refiling
of any other provisions of that policy form.
(k) After the
effective date of this section, any company may file with the Commissioner a
written notice of its election to comply with the provision of this section
after a specified date before January 1, 1989, which shall be the operative
date of this section for the company. If a company makes no election, the
operative date of this section for the company shall be January 1, 1989. (Added
2015, No. 63, § 2, eff. June 17, 2015.)
