N.Y. Insurance Law § 4221: Standard nonforfeiture law

§ 4221. Standard nonforfeiture law. (a) In the case of policies issued

on or after the operative date of this section as defined in subsection

(p) hereof, no policy of life insurance, except as stated in subsection

(o) hereof, shall be delivered or issued for delivery in this state

unless it shall contain in substance the following provisions, or

corresponding provisions which in the opinion of the superintendent are

at least as favorable to the defaulting or surrendering policyholder as

are minimum requirements hereinafter specified and are essentially in

compliance with subsection (n) hereof:

(1) That, in the event of default in any premium payment, the company

will grant, upon proper request not later than sixty days after the due

date of the premium in default, a paid-up nonforfeiture benefit on a

plan stipulated in the policy, effective as of such due date, of such

value as may be hereinafter specified. In lieu of such stipulated

paid-up nonforfeiture benefit, the company may substitute, upon proper

request not later than sixty days after the due date of the premium in

default, a more favorable alternative paid-up nonforfeiture benefit

which provides a greater amount or longer period of death benefits or,

if applicable, a greater amount or earlier payment of endowment

benefits.

(2) That, upon surrender of the policy within sixty days after the due

date of any premium payment in default after premiums have been paid for

at least three full years, the company will pay, in lieu of any paid-up

nonforfeiture benefit, a cash surrender value of such amount as may be

hereinafter specified.

(3) That a specified paid-up nonforfeiture benefit shall become

effective as specified in the policy unless the person entitled to make

such election elects another available option not later than sixty days

after the due date of the premium in default.

(4) That, if the policy shall have become paid up by completion of all

premium payments or if it is continued under any paid-up nonforfeiture

benefit which became effective on or after the third policy anniversary,

the company will pay, upon surrender of the policy within thirty days

after any policy anniversary, a cash surrender value of such amount as

may be hereinafter specified.

(5) In the case of policies which provide for the crediting of

additional amounts pursuant to subsection (b) of section four thousand

two hundred thirty-two of this article, under which cash surrender

values are adjusted in accordance with a market-value adjustment

formula, 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, a statement

of the mortality table, interest rate, and method used in calculating

cash surrender values and any paid-up nonforfeiture benefits available

under the policy. In the case of all other policies, a statement of the

mortality table and interest rate used in calculating the cash surrender

values and any paid-up nonforfeiture benefits available under the

policy, together with a table showing the cash surrender value, if any,

and paid-up nonforfeiture benefit, if any, available under the policy on

each policy anniversary either during the first twenty policy years or

during the term of the policy, whichever is shorter, such values and

benefits to be calculated upon the assumption that there are no

dividends or paid-up additions credited to the policy and that there is

no indebtedness to the company on the policy.

(5-a) In the case of policies which provide for the crediting of

additional amounts pursuant to subsection (b) of section four thousand

two hundred thirty-two of this article and which provide for surrender

charges in accordance with subsection (n-1) of this section, a statement

as to any charges that will be imposed upon surrender of the policy.

(5-b) In the case of policies that provide for the adjustment of any

cash surrender values in accordance with a market-value adjustment

formula, a statement as to the times (which shall not be less frequently

than once every ten years after issuance of the policy) on which cash

surrender values will be determined without the use of such a formula.

(6) A statement that the cash surrender values and the paid-up

nonforfeiture benefits available under the policy are not less than the

minimum values and benefits required by any statute of the state in

which the policy is delivered; an explanation of the manner in which the

cash surrender values and the paid-up nonforfeiture benefits are altered

by the existence of any paid-up additions credited to the policy or any

indebtedness to the company on the policy; if a detailed statement of

the method of computation of the values and benefits shown in the policy

is not stated therein, a statement that such method of computation has

been filed with the insurance supervisory official of the state in which

the policy is delivered; and a statement of the method to be used in

calculating the cash surrender value and paid-up nonforfeiture benefit

available under the policy on any policy anniversary beyond the last

anniversary for which such values and benefits are consecutively shown

in the policy.

(7) That the company shall deliver at issue to each holder of a policy

under which additional amounts may be credited pursuant to subsection

(b) of section four thousand two hundred thirty-two of this article, or

under which cash surrender values and policy loan values are adjusted in

accordance with a market-value adjustment formula, a statement

containing such information as the superintendent prescribes, and shall

mail to each such holder at least once each policy year or within sixty

days after the end of a policy year a statement as of a date during such

year as to the death benefit, cash surrender value and loan value under

the policy (and any amount by which such cash surrender value and loan

value were adjusted in accordance with a market-value adjustment

formula) on such date as well as such further information as the

superintendent requires. The statement shall be addressed to the last

post-office address of the policyholder known to the company.

(8) Any of the foregoing provisions or portions of this subsection not

applicable by reason of the plan of insurance may, to the extent

inapplicable, be omitted from the policy.

The company shall reserve the right to defer the payment of any cash

surrender value for a period of six months after demand therefor with

surrender of the policy.

(b) (1) In the case of contracts issued on or after the operative date

of this section as defined in subsection (p) hereof and prior to the

operative date of section four thousand two hundred twenty-three of this

article, no contract of annuity or pure endowment, except as stated in

subsection (o) hereof, shall be delivered or issued for delivery in this

state unless it contains in substance the following provisions, or

corresponding provisions which in the opinion of the superintendent are

at least as favorable to the defaulting or surrendering contract holder:

(A) That in the event of default in any stipulated payment the company

will grant a paid-up nonforfeiture benefit on a plan stipulated in the

contract, effective as of such due date, of such value as may be

hereinafter specified.

(B) A statement of the mortality table, if any, and interest rate used

in calculating the paid-up nonforfeiture benefits available under the

contract, together with a table showing either the cash surrender value

or the paid-up nonforfeiture benefit, if any, available on each

anniversary of the contract either during the first twenty contract

years or during the term of stipulated payments, whichever is shorter,

such benefits to be calculated upon the assumption that there are no

dividends or paid-up additions credited to the contract and that there

is no indebtedness to the company on the contract.

(C) A statement that the paid-up nonforfeiture benefits available

under the contract are not less than the minimum benefits required by

any statute of the state in which the contract is delivered; an

explanation of the manner in which the paid-up nonforfeiture benefits

are altered by the existence of any paid-up additions credited to the

contract or any indebtedness to the company on the contract; if a

detailed statement of the method of computation of the benefits shown in

the contract is not stated therein, a statement that such method of

computation has been filed with the insurance supervisory official of

the state in which the contract is delivered; and a statement of the

method to be used in calculating the paid-up nonforfeiture benefit

available under the contract on any contract anniversary beyond the last

anniversary for which such benefits are consecutively shown in the

contract.

If a company shall provide for the payment of a cash surrender value,

it shall reserve the right to defer the payment of such value for a

period of six months after demand therefor with surrender of the

contract.

(2) Notwithstanding the requirements of this subsection, any deferred

annuity contract may provide that if the annuity allowed under any

paid-up nonforfeiture benefit would be less than sixty dollars annually,

the company may at its option grant a cash surrender value in lieu of

such paid-up nonforfeiture benefit of such amount as may be required by

subsection (f) hereof.

(c) (1) Any cash surrender value available under any policy referred

to in subsection (a) hereof, in the event of default in a premium

payment due on any policy anniversary, whether or not required by such

subsection, shall be an amount not less than the excess, if any, of the

present value, on such anniversary, of the future guaranteed benefits

which would have been provided for by the policy, including any existing

paid-up additions, if there had been no default, over the sum of (i) the

then present value of the adjusted premiums as defined in subsections

(g), (h), (i) and (k) hereof, corresponding to premiums which would have

fallen due on and after such anniversary, and (ii) the amount of any

indebtedness to the company on the policy, including interest due or

accrued.

(2) In the case of any policy issued on or after the operative date of

subsection (k) hereof, which provides supplemental life insurance or

annuity benefits at the option of the insured and for an identifiable

additional premium by rider or supplemental policy provision, the cash

surrender value referred to in paragraph one of this subsection shall be

in an amount not less than the sum of the cash surrender value as

defined in such paragraph for an otherwise similar policy issued at the

same age without such rider or supplemental policy provision, the cash

surrender value as defined in such paragraph for a policy which provides

only the supplemental life insurance benefits otherwise provided by such

rider or supplemental policy provision, and the cash surrender value as

defined in section four thousand two hundred twenty-three of this

article for a contract which provides only the supplemental annuity

benefits otherwise provided by such rider or supplemental policy

provision.

(3) In the case of any family policy issued on or after the operative

date of subsection (k) hereof as defined therein, which defines a

primary insured and provides term insurance on the life of the spouse of

the primary insured expiring before the spouse's age seventy-one, the

cash surrender value referred to in paragraph one of this subsection

shall be an amount not less than the sum of the cash surrender value as

defined in such paragraph for an otherwise similar policy issued at the

same age without such term insurance on the life of the spouse and the

cash surrender value as defined in such paragraph for a policy which

provides only the benefits otherwise provided by such term insurance on

the life of the spouse.

(4) Any cash surrender value available within thirty days after any

policy anniversary under any such policy paid up by completion of all

premium payments or any such policy continued under any paid-up

nonforfeiture benefit, whether or not required by subsection (a) hereof,

shall be an amount not less than the present value, on such anniversary,

of the future guaranteed benefits provided for by the policy, including

any existing paid-up additions, decreased by any indebtedness to the

company on the policy, including interest due or accrued.

(5) Every company must provide, to any policyowner who so requests in

writing, within twenty business days from the date the written request

is received by the company, a statement of the cash surrender value of

the policy.

(d) Any paid-up nonforfeiture benefit available under any policy

referred to in subsection (a) hereof, in the event of default in a

premium payment due on any policy anniversary shall be such that its

present value as of such anniversary shall be at least equal to the cash

surrender value then provided for by the policy or, if none is provided

for, that cash surrender value which would have been required by this

section in the absence of the condition that premiums shall have been

paid for at least a specified period.

(e) (1) Any paid-up nonforfeiture benefit available under any annuity

or pure endowment contract referred to in subsection (b) hereof, in the

event of default in a stipulated payment due on any contract anniversary

shall be such that its present value as of such anniversary shall be not

less than the excess, if any, of the present value, on such anniversary,

of the future guaranteed benefits which would have been provided for by

the contract, including any existing paid-up additions, if there had

been no default, over the sum of (i) the then present value of the

adjusted stipulated payments defined in subsection (g) hereof

corresponding to stipulated payments which would have fallen due on and

after such anniversary, and (ii) the amount of any indebtedness to the

company on the contract, including interest due or accrued.

(2) In determining the benefits referred to in paragraph one hereof

and in calculating the adjusted stipulated payments referred to in

subsection (g) hereof, in the case of annuity contracts under which an

election may be made to have annuity payments commence at optional

dates, the annuity payments shall be deemed to commence at a date which

shall be the latest permitted by the contract for the commencement of

such payments but not later than the contract anniversary nearest the

annuitant's seventieth birthday or the tenth anniversary of the

contract, whichever is later; and the stipulated payments shall be

deemed to be payable for the longest period during which they would be

payable if election were made to have the annuity payments commence at

such date.

(f) Any cash surrender value allowed by any annuity or pure endowment

contract referred to in subsection (b) hereof and the present value,

under any optional provision, of future benefits commencing on the due

date of the stipulated payment in default shall each be at least equal

to the then present value of the minimum paid-up nonforfeiture benefit

required by subsection (e) hereof.

(g) (1) This subsection shall not apply to policies issued on or after

the operative date of subsection (k) as defined herein.

(2) Except as provided in paragraph four hereof, the adjusted premiums

for any policy referred to in subsection (a) hereof 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 stated in the policy as extra premiums to cover

impairments or special hazards, that the present value, at the date of

issue of the policy, of all such adjusted premiums shall be equal to the

sum of (i) the then present value of the future guaranteed benefits

provided for by the policy; (ii) two percent of the amount of insurance,

if the insurance be uniform in amount, or of the equivalent uniform

amount, as hereinafter defined, if the amount of insurance varies with

duration of the policy; (iii) forty percent of the adjusted premium for

the first policy year; (iv) twenty-five percent of either the adjusted

premium for the first policy year or the adjusted premium for a whole

life policy of the same uniform or equivalent uniform amount with

uniform premiums for the whole of life issued at the same age for the

same amount of insurance, whichever is less. Provided, however, that in

applying the percentages specified in items (iii) and (iv) hereof, no

adjusted premium shall be deemed to exceed four percent of the amount of

insurance or uniform amount equivalent thereto. The date of issue of a

policy for the purpose of this subsection shall be the date as of which

the rated age of the insured is determined.

(3) In the case of a policy providing an amount of insurance varying

with duration of the policy, the equivalent uniform amount thereof for

the purpose of this subsection shall be deemed to be the uniform amount

of insurance provided by an otherwise similar policy, containing the

same endowment benefit or benefits, if any, issued at the same age and

for the same term, the amount of which does not vary with duration and

the benefits under which have the same present value at the date of

issue as the benefits under the policy, provided, however, that in the

case of a policy providing a varying amount of insurance (including

policies in which the death benefit prior to a date specified in the

policy does not exceed the premiums paid with interest, or the cash

value of the policy if greater) issued on the life of a child under age

ten, the equivalent uniform amount of insurance shall be calculated as

though the amount of insurance provided by the policy prior to the

attainment of age ten were the amount provided by such policy at age

ten.

(4) The adjusted premiums for any policy providing term insurance

benefits by rider or supplemental policy provision shall be equal to (i)

the adjusted premiums for an otherwise similar policy issued at the same

age without such term insurance benefits, increased, during the period

for which premiums for such term insurance benefits are payable, by (ii)

the adjusted premiums for such term insurance, the foregoing items (i)

and (ii) being calculated separately and as specified in paragraphs two

and three hereof except that, for the purposes of items (ii), (iii) and

(iv) of paragraph two hereof, the amount of insurance or equivalent

uniform amount of insurance used in the calculation of the adjusted

premiums referred to in item (ii) of this paragraph shall be equal to

the excess of the corresponding amount determined for the entire policy

over the amount used in the calculation of the adjusted premiums in item

(i) of this paragraph.

(5) The adjusted stipulated payments for any annuity or pure endowment

contract referred to in subsection (b) hereof shall be calculated on an

annual basis and shall be such uniform percentage of the respective

stipulated payments specified in the contract for each contract year

that the present value, at the date of issue of the contract, of all

such adjusted stipulated payments shall be equal to the sum of (i) the

then present value of the future guaranteed benefits provided for by the

contract; (ii) twenty percent of the adjusted stipulated payment for the

first contract year; and (iii) two percent of the adjusted stipulated

payment for the first contract year for each year not exceeding twenty

during which stipulated payments are payable.

(6) Except as otherwise provided in subsections (h), (i) and (j)

hereof, all adjusted premiums, adjusted stipulated payments, and present

values referred to in this section shall be calculated on the basis of

(i) the rate of interest, not exceeding three and one-half percent per

annum, specified in the policy or contract for calculating cash

surrender values, if any, and paid-up nonforfeiture benefits; and (ii) a

mortality table which shall be: for ordinary insurance, the

Commissioners' 1941 Standard Ordinary Mortality Table, provided that for

any category of ordinary insurance issued on female risks, adjusted

premiums and present values may be calculated according to an age not

more than three years younger than the actual age of the insured; for

industrial insurance, the 1941 Standard Industrial Mortality Table; for

annuity and pure endowment contracts, either the 1937 Standard Annuity

Mortality Table, the Annuity Mortality Table for 1949 Ultimate, any

modification of either of these tables approved by the superintendent or

any other table approved by the superintendent. Provided, however, that

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 one hundred and

thirty percent of the rates of mortality according to such applicable

table. Provided, further, that for insurance issued on a substandard

basis, the calculation of any such adjusted premiums and present values

may be based on such other table of mortality as may be specified by the

company and approved by the superintendent.

(h) (1) This subsection shall not apply to ordinary policies issued on

or after the operative date of subsection (k) hereof.

(2) In the case of ordinary policies issued on or after the operative

date of this subsection, all adjusted premiums and present values shall

be calculated on the basis of the Commissioners 1958 Standard Ordinary

Mortality Table and the rate of interest specified in the policy for

calculating cash surrender values and paid-up nonforfeiture benefits not

exceeding three and one-half percent per annum except that four percent

per annum may be used for policies issued on or after June thirteenth,

nineteen hundred seventy-four and prior to January first, nineteen

hundred seventy-nine, and a rate of interest not exceeding five and

one-half percent per annum may be used for policies issued on or after

January first, nineteen hundred seventy-nine, provided that for any

category of ordinary insurance issued on female risks, adjusted premiums

and present values may be calculated according to an age not more than

six years younger than the actual age of the insured; provided, however,

that 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 1958 Extended Term Insurance Table. Provided, further,

that for insurance issued on a substandard basis, the calculation of any

such adjusted premiums and present values may be based on such other

table of mortality as may be specified by the company and approved by

the superintendent.

(3) Any company may file with the superintendent a written notice of

its election to comply with the provisions of this subsection after a

specified date before January first, nineteen hundred sixty-six. After

the filing of such notice, then upon such specified date (which shall be

the operative date of this subsection for such company), this subsection

shall become operative with respect to the ordinary policies thereafter

issued by such company. If a company makes no such election, the

operative date of this subsection for such company shall be January

first, nineteen hundred sixty-six.

(i) (1) In the case of industrial policies issued on or after the

operative date of this subsection, all adjusted premiums and present

values shall be calculated on the basis of the Commissioners 1961

Standard Industrial Mortality Table and the rate of interest specified

in the policy for calculating cash surrender values and paid-up

nonforfeiture benefits not exceeding three and one-half percent per

annum except that four percent per annum may be used for policies issued

on or after June thirteenth, nineteen hundred seventy-four and prior to

January first, nineteen hundred seventy-nine and a rate of interest not

exceeding five and one-half percent per annum may be used for policies

issued on or after January first, nineteen hundred seventy-nine;

provided, however, that 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 1961 Industrial Extended Term

Insurance Table. Provided, further, that for insurance issued on a

substandard basis, the calculation of any such adjusted premiums and

present values may be based on such other table of mortality as may be

specified by the company and approved by the superintendent.

(2) Any company may file with the superintendent a written notice of

its election to comply with the provisions of this subsection after a

specified date before January first, nineteen hundred and sixty-eight.

After the filing of such notice, then upon such specified date (which

shall be the operative date of this subsection for such company), this

subsection shall become operative with respect to the industrial

policies thereafter issued by such company. If a company makes no such

election, the operative date of this subsection for such company shall

be January first, nineteen hundred and sixty-eight.

(j) In the case of individual annuity and pure endowment contracts

issued on or after the operative date of paragraph three of subsection

(c) of section four thousand two hundred seventeen of this article, and

prior to the operative date of section four thousand two hundred

twenty-three of this article, all adjusted stipulated payments and

present values referred to in this section shall be calculated on the

basis of the Annuity Mortality Table for 1949, Ultimate, or any

modification of this table approved by the superintendent, and the rate

of interest not exceeding four percent per annum, specified in the

contract for calculating cash surrender values, if any, and paid-up

nonforfeiture benefits, except that, if such rate of interest exceeds

three and one-half percent per annum, there shall be substituted for

such mortality table the 1971 Individual Annuity Mortality Table, or any

modification of this table approved by the superintendent.

(k) (1) This subsection shall apply to all policies issued on or after

the operative date as defined in this subsection.

(2) Except as provided in paragraph eight of this subsection, 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 (i) the then present value of the

future guaranteed benefits provided for by the policy; (ii) 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 ten policy years; and (iii) one hundred twenty-five percent of

the nonforfeiture net level premium as hereinafter defined. Provided,

however, that in applying the percentage specified in (iii) above 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 ten policy years. The date of issue of a policy for the

purpose of this subsection shall be the date as of which the rated age

of the insured is determined.

(3) 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 such policy on which a

premium falls due.

(4) 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 initially be

calculated 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 such 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.

(5) Except as otherwise provided in paragraph eight of this

subsection, the recalculated future adjusted premiums for any such

policy shall be such 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

(A) the sum of

(i) the then present value of the then future guaranteed benefits

provided for by the policy and

(ii) the additional expense allowance, if any, over

(B) the then cash surrender value, if any, or present value of any

paid-up nonforfeiture benefit under the policy.

(6) The additional expense allowance, at the time of the change to the

newly defined benefits or premiums, shall be the sum of (i) one percent

of the excess, if positive, of the average amount of insurance at the

beginning of each of the first ten policy years subsequent to the change

over the average amount of insurance prior to the change at the

beginning of each of the first ten 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 (ii) one hundred

twenty-five percent of the increase, if positive, in the nonforfeiture

net level premium.

(7) The recalculated nonforfeiture net level premium shall be equal to

the result obtained by dividing subparagraph (A) by subparagraph (B)

hereof where:

(A) equals the sum of

(i) 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, and

(ii) the present value of the increase in future guaranteed benefits

provided for by the policy, and

(B) equals 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.

(8) Notwithstanding any other provision of this subsection 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, such policy has the same tabular mortality cost as an otherwise

similar policy issued on the standard basis which provides higher

uniform amounts of insurance, adjusted premiums and present values for

such substandard policy may be calculated as if it were issued to

provide such higher uniform amounts of insurance on the standard basis.

(9) All adjusted premiums and present values referred to in this

section shall for all policies of ordinary insurance be calculated on

the basis of

(A) the Commissioners 1980 Standard Ordinary Mortality Table, or

(B) 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; 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 subsection for policies issued in that calendar year.

Provided, however, that:

(i) 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 subsection, for policies issued in the immediately preceding

calendar year.

(ii) Under any paid-up nonforfeiture benefit, including any paid-up

dividend additions, any cash surrender value available, whether or not

required by subsection (a) hereof, 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.

(iii) 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.

(iv) 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.

(v) For insurance issued on a substandard basis, the calculation of

any such adjusted premiums and present values may be based on

appropriate modifications of the aforementioned tables.

(vi) Any ordinary mortality tables, adopted after nineteen hundred

eighty by the National Association of Insurance Commissioners (or any

modifications thereof for any specified class or classes of risks), that

are approved by the superintendent for use in determining the minimum

nonforfeiture standard may be substituted for the Commissioners 1980

Standard Ordinary Mortality Table with or without Ten-Year Select

Mortality Factors or for the Commissioners 1980 Extended Term Insurance

Table.

(10) The nonforfeiture interest rate per annum for any policy issued

in a particular calendar year shall be equal to one hundred and

twenty-five percent of the calendar year statutory valuation interest

rate for such policy as defined in section four thousand two hundred

seventeen of this article rounded to the nearer one quarter of one

percent, computed, with respect to a single premium life insurance

policy of the kind referred to in item (vi) of subparagraph (B) of

paragraph four of subsection (c) of such section, on a year of issue

basis by using a reference interest rate defined for such policy in

subparagraph (F) of such paragraph for the year immediately preceding

the year of issue on the assumption that the company has submitted an

opinion and memorandum, in form and substance satisfactory to the

superintendent, of a qualified actuary with respect to such single

premium life insurance policies in accordance with item (vi) of

subparagraph (B) of such paragraph.

(11) Notwithstanding any other provision in this chapter 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.

(12) After May twenty-fourth, nineteen hundred eighty-two, any company

may file with the superintendent a written notice of its election to

comply, with respect to any plan of insurance, with the provisions of

this subsection after a specified date before January first, nineteen

hundred eighty-nine, which shall be the operative date of this

subsection for that plan of insurance for such company; the operative

dates of this subsection for other plans of insurance for such company

shall be any dates not later than January first of the third subsequent

calendar year, but in no event later than January first, nineteen

hundred eighty-nine. If a company makes no such election with respect to

any plan of insurance, the operative date of this subsection for such

company shall be January first, nineteen hundred eighty-nine.

(l) In the case of any plan of life insurance which provides for

future premium determination, the amounts of which are to be determined

by the insurance company based on then estimates of future experience,

or in the case of any plan of life insurance which is of such a nature

that minimum values cannot be determined by the methods described in

subsection (a), (c), (d), (g), (h), (i) or (k) of this section, then:

(1) the superintendent must be satisfied that the benefits provided

under the plan are substantially as favorable to policyholders and

insureds as the minimum benefits otherwise required by subsection (a),

(c), (d), (g), (h), (i) or (k) hereof;

(2) the superintendent must be satisfied that the benefits and the

pattern of premiums of that plan are not such as to mislead prospective

policyholders or insureds;

(3) the cash surrender values and paid-up nonforfeiture benefits

provided by such plan must not be less than the minimum values and

benefits required for the plan computed by a method consistent with the

principles of this section, as determined by the superintendent.

(m) (1) Any cash surrender value and any paid-up nonforfeiture

benefit, available under any such policy or contract in the event of

default in the payment of any premium or stipulated payment due at any

time other than on the policy or contract anniversary, shall be

calculated with allowance for the lapse of time and the payment of

fractional premiums or stipulated payments beyond the beginning of the

policy or contract year in which the default occurs.

(2) All values referred to in subsections (c) through (k) hereof, may

be calculated upon the assumption that any death benefit is payable at

the end of the policy or contract year of death.

(3) Notwithstanding the provisions of subsections (c) and (e) hereof,

additional benefits payable (i) in the event of death or dismemberment

by accident, (ii) in the event of total and permanent disability, (iii)

as reversionary annuity or deferred reversionary annuity benefits, (iv)

as term insurance benefits provided by a rider or supplemental policy

provision to which, if issued as a separate policy, this section would

not apply, (v) as term insurance on the life of a child or on the lives

of children provided in a policy on the life of a parent of the child,

if such term insurance expires before the child's age is twenty-six, is

uniform in amount after the child's age is one, and has not become

paid-up by reason of the death of a parent of the child and (vi) as

other policy benefits additional to life insurance, endowment, and

annuity benefits, and premiums for all such additional benefits, shall

be disregarded in ascertaining cash surrender values and nonforfeiture

benefits required by this section, and no such additional benefits shall

be required to be included in any paid-up nonforfeiture benefits.

(n) (1) This subsection, in addition to all other applicable

provisions of this section, shall apply to all policies issued on or

after January first, nineteen hundred eighty-six.

(2) Any cash surrender value available under the policy in the event

of default in a premium payment due on any policy anniversary shall be

in an amount which does not differ by more than two-tenths of 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 ten policy years, from the sum of (i) the greater of zero

and the basic cash value hereinafter specified and (ii) the present

value of any existing paid-up additions less the amount of any

indebtedness to the company under the policy.

(3) The basic cash value shall be equal to the present value, on such

anniversary, of the future guaranteed benefits which would have been

provided for by the policy, excluding any existing paid-up additions and

before deduction of any indebtedness to the company, if there had been

no default, less the then present value of the nonforfeiture factors, as

hereinafter defined, corresponding to premiums which would have fallen

due on and after such anniversary. Provided, however, that the effects

on the basic cash value of supplemental life insurance or annuity

benefits or of family coverage, as described in subsection (c) or (g)

hereof, whichever is applicable, shall be the same as are the effects

specified in such subsection, whichever is applicable, on the cash

surrender values defined in that subsection.

(4) The nonforfeiture factor for each policy year shall be an amount

equal to a percentage of the adjusted premium for the policy year, as

defined in subsection (g) or (k) hereof, whichever is applicable. Except

as is required by the next succeeding sentence of this paragraph, such

percentage:

(A) must be the same percentage for each policy year between the

second policy anniversary and the later of (i) the fifth policy

anniversary and (ii) the first policy anniversary at which there is

available under the policy a cash surrender value in an amount, before

including any paid-up additions and before deducting any indebtedness,

of at least two-tenths of 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 ten policy years; and

(B) must be such that no percentage after the later of the two policy

anniversaries specified in subparagraph (A) hereof may apply to fewer

than five consecutive policy years.

Provided, that no basic cash value may be less than the value which

would be obtained if the adjusted premiums for the policy, as defined in

subsection (g) or (k) hereof, whichever is applicable, were substituted

for the nonforfeiture factors in the calculation of the basic cash

value.

(5) All adjusted premiums and present values referred to in this

subsection shall for a particular policy be calculated on the same

mortality and interest bases as are used in demonstrating the policy's

compliance with the other subsections of this section.

(6) (A) The cash surrender values referred to in this subsection shall

include any endowment benefits provided for by the policy.

(B) Any cash surrender value available other than in the event of

default in a premium payment due on a policy anniversary, and the amount

of any paid-up nonforfeiture benefit available under the policy in the

event of default in a premium payment shall be determined in manners

consistent with the manners specified for determining the analogous

minimum amounts in subsections (a), (c), (d), (k) and (m) hereof.

(C) The amounts of any cash surrender values and of any paid-up

nonforfeiture benefits granted in connection with additional benefits

such as those listed as items (i) through (vi) in paragraph three of

subsection (m) hereof shall conform with the principles of this

subsection.

(n-1) (1) Notwithstanding any other provision in this section, any

policy that meets the requirements of this subsection shall be deemed to

provide the minimum nonforfeiture benefits and cash surrender values

required by this section. Any policy which is issued by a company after

the operative date of this subsection for the company and under which

additional amounts may be credited pursuant to subsection (b) of section

four thousand two hundred thirty-two of this article must meet the

requirements of this subsection.

(2) In this subsection,

(A) "Policy value" means an amount equal to gross premiums paid under

a policy (excluding separately identified premiums for riders or

supplementary benefits that are not credited to the policy value) plus

interest credited less the amount of any partial withdrawals and the

following charges as specified in the policy: (i) expense charges, (ii)

benefits charges, (iii) service charges, and (iv) partial surrender

charges.

(B) "Benefit charges" means mortality charges made for life insurance

on the insured person or persons and any charges made for riders or

supplementary benefits.

(C) "Service charges" means charges for the cost of transactions

requested by the policyowner such as partial withdrawals and benefit

illustrations. Transactional charges made under mandatory policy

provisions shall not be assessed unless specifically permitted by law or

regulation for such transactions.

(D) "Expense charges" means charges (other than service charges)

deducted from gross premiums before premiums are credited to the policy

value or otherwise deducted from the policy value.

(E) "Excess first year expense charges" means the greatest amount by

which (x) can exceed (y) based, for stipulated premium policies, on the

premiums set forth in the policy and, for other policies, on the

assumption that any premium (other than a single premium) payable in the

first policy year is also payable during the entire premium paying

period, where

(x) is the amount of the expense charges made in the first policy year

and

(y) is the arithmetic average of the corresponding charges which the

policy states would be imposed in policy years two through twenty or the

premium paying period, if shorter.

(F) "Excess expense charges for a face amount increase" means the

greatest amount by which (x) can exceed (y) based, for stipulated

premium policies, on the premiums set forth in the policy and, for other

policies, on the assumption that the net level whole life annual premium

for the increase applies throughout the remaining premium paying period,

where

(x) is the amount of the expense charges attributable to an increase

in face amount of insurance in the first policy year of the increase,

and

(y) is the arithmetic average of the corresponding charges

attributable to the increase which the policy states would be imposed in

the nineteen policy years following the increase or the premium paying

period, if shorter.

(G) "Interest credited" means the amount of interest credited to the

policy value but, with respect to policies meeting the requirements of

subparagraph (A) of paragraph three of this subsection, not less than

three percent in any year.

(H) "Net level whole life annual premium at issue" means an annual

premium based on face amounts of insurance set forth in the policy and

on the assumption of level annual premiums for life, the mortality table

rate used to calculate the maximum mortality charges (but not greater

than that permitted under item (iv) of subparagraph (A) of paragraph

three of this subsection) and an interest rate based on the rate

specified in the policy but not less than the lesser of four percent and

the nonforfeiture interest rate per annum pursuant to paragraph ten of

subsection (k) of this section.

(I) "Net level whole life annual premium for an increase in the face

amount of insurance" means an additional annual premium for an increase

in the face amount of insurance determined as of the date of the

increase in accordance with subparagraph (H) of this paragraph as though

such increase were a separate policy.

(J) "Increase in face amount of insurance" means an increase in the

schedule of face amounts of insurance provided for in the policy and

made at the request of the policyholder and shall not include increases

in face amount resulting from a change in the death benefit option or

changes in death benefit pursuant to policy terms that do not affect the

face amount.

(K) "Surrender charge" means a deferred charge made to the policy

value in the event of a full or partial surrender of the policy,

reduction in the face amount of insurance or premium, or a default in a

premium payment.

(L) "Cash surrender value" means an amount equal to the policy value

less any surrender charge, before reduction for outstanding loans or

other amounts due under the policy.

(M) "Deferred first year expense charge", at issue or for an increase

in the face amount of insurance, means any portion of the allowable

first year expense charge that is not deducted from premiums or charged

to the policy value in the year of issue, or in the policy year of a

face amount increase, but deferred and charged to the policy value in

subsequent years.

(N) "Consumer price ratio" means the ratio (not to exceed two) of (x)

the consumer price index (for all urban households) for the September

preceding the policy year in which the ratio is being applied to (y) the

consumer price index for September, nineteen hundred eighty-five.

(3) A policy that meets the requirements of this subsection must

provide for cash surrender values that meet the requirements of either

subparagraph (A) or subparagraph (B) and comply with the provisions of

subparagraphs (C) and (D) of this paragraph.

(A) Cash surrender values shall be deemed to meet the requirements of

this subparagraph, if the following conditions are met:

(i) Expense charges for any policy year shall not exceed the

following:

(I) ninety percent of premiums received up to the net level whole life

annual premium at issue (regardless of when received),

(II) ten percent of all other premiums received,

(III) ninety percent of any net level whole life annual premium for

increases in the face amount of insurance (including increases

offsetting previous decreases),

(IV) ten dollars per one thousand dollars of initial face amount in

the first policy year,

(V) one dollar per one thousand dollars of the first one hundred

thousand dollars of face amount in subsequent policy years,

(VI) ten dollars per one thousand dollars of any increase in the face

amount of insurance in the year of increase (including increases

offsetting previous decreases),

(VII) a charge per policy in the first policy year equal to the

product of one hundred fifty dollars and the consumer price ratio, and

(VIII) in policy years after the first, a charge per policy per month

equal to the product of five dollars and the consumer price ratio.

(ii) Any surrender charge provided in the policy shall be such that

the initial surrender charge together with the expense charges made in

the first policy year (and on premiums up to the net level whole life

annual premium if received after the first year) do not exceed the sum

of the amounts determined in accordance with clauses (I) and (II) (for

premiums received in the first year) and clauses (IV) and (VII) of item

(i) of this subparagraph. The surrender charge at any time shall not be

greater than the difference between the maximum initial surrender charge

permitted under this subparagraph and the sum of all the deferred

expense charges made up to that time. Any additional surrender charges

that are imposed in connection with an increase in face amount of the

policy shall be such that such additional charges together with any

expense charges made in connection with such increase do not exceed the

sum of the amounts determined in accordance with clauses (III) and (VI)

of item (i) of this subparagraph.

(iii) Deferred first year expense charges shall be such that: (I) the

charge for any one year shall not exceed the maximum allowable surrender

charge for that year, and (II) the total of all such charges at any time

plus the surrender charge at that time shall not exceed the maximum

initial surrender charge. Any deferred first year expense charge imposed

with respect to an increase in the face amount of insurance shall be

subject to comparable limitations.

(iv) A policy meeting the requirements of this subparagraph if issued

before the operative date of subsection (k) of this section may not

impose mortality charges in excess of those based on the commissioners

1958 standard ordinary mortality table in the case of a standard

medically underwritten insured or the commissioners 1958 extended term

insurance table in the case of any other standard insured, and if issued

on or after such operative date may not impose mortality charges in

excess of those based on the commissioners 1980 standard ordinary

mortality table in the case of a standard medically underwritten insured

or the commissioners 1980 extended term insurance table in the case of

any other standard insured. At the option of the company, maximum

charges based on the commissioners 1980 standard ordinary mortality

table may be computed using ten-year select mortality factors. Maximum

charges may also be based on any other table (or modification thereof

for the specified class of risk) approved by the superintendent pursuant

to item (vi) of subparagraph (B) of paragraph nine of subsection (k) of

this section. For insurance issued on a substandard basis, such charges

may be based on appropriate modifications of such tables.

(B) Cash surrender values shall be deemed to meet the requirements of

this subparagraph, if the following conditions are met:

(i) Policy values shall not be less than a minimum policy value which

reflects the same transactions, the same interest credited and the same

benefit charges that are reflected in the actual policy value, except

that the excess first year expense charges shall not be greater than the

initial expense allowance, and any excess expense charges for a face

amount increase after issue shall not be greater than the increase

expense allowance. For purposes of this item, the initial expense

allowance shall be (I) the lesser of (aa) one hundred twenty-five

percent of the net level whole life annual premium at issue and (bb)

four percent of the average face amount of insurance provided under the

policy during the first ten policy years plus (II) one percent of such

average face amount, and the increase expense allowance shall be (I) the

lesser of (aa) one hundred twenty-five percent of the net level whole

life annual premium for an increase in the face amount of insurance and

(bb) four percent of the average increase in face amount of insurance

over a period of ten policy years (excluding any increases previously

taken into account in determining an expense allowance under this item)

plus (II) one percent of any such average increase.

(ii) Any surrender charge provided in the policy shall be such that

the initial surrender charge together with any excess first year expense

charges do not exceed the initial expense allowance. Any additional

surrender charges that are imposed in connection with an increase in

face amount shall be such that any such additional charge together with

any excess expense charges made in connection with such increase do not

exceed the increase expense allowance.

(iii) The policy shall provide that at least once each policy year the

policyholder has the option to apply the portion of the cash surrender

value necessary to provide an amount of guaranteed paid-up life

insurance at least as great as the lesser of (I) and (II), where (I) is

the amount of paid-up life insurance provided by applying the cash

surrender value to provide such paid-up insurance, computed on the basis

of an interest rate (not less than the lesser of (aa) four percent and

(bb) the nonforfeiture interest rate per annum pursuant to paragraph ten

of subsection (k) of this section minus one percent) guaranteed in the

policy for this purpose, and a mortality basis (not less favorable to

the policyholder than the mortality basis specified for an insured not

medically underwritten in item (iv) of subparagraph (A) of this

paragraph) guaranteed in the policy for this purpose, and (II) is the

amount of paid-up life insurance such that the amount at risk on the

paid-up insurance is the same as the amount at risk under the policy. If

the option is elected, the portion of the cash surrender value not

applied to provide the paid-up life insurance shall be paid to the

policyholder. The guaranteed paid-up life insurance benefit may be

provided under the policy or by means of a separate single premium life

insurance policy issued by the company or an affiliate or subsidiary

thereof. For purposes of this item, the term "cash surrender value" is

after reduction for outstanding loans or other amounts due under the

policy.

(C) The surrender charge in policy years after the first shall not

exceed the maximum initial surrender charge permitted under this

subsection multiplied by the ratio of (i) the value of a life annuity

due of one dollar per year for the balance of the amortization period to

(ii) the corresponding annuity value at issue, based on the mortality

table and interest rate used in calculating the net level whole life

annual premiums. For all policies the maximum amortization period is

twenty years.

(D) Any surrender charge that is imposed on an increase in premium

payments under a policy meeting the requirements of this subsection that

does not result in any increase in face amount of the policy shall not

exceed the difference between (I) the maximum initial surrender charge

computed on the assumption that premiums were paid at the increased rate

from the date of issuance of the policy and (II) the maximum initial

surrender charge permitted under this subsection.

(4) The superintendent may issue regulations to implement this

subsection.

(5) The operative date of this subsection for a company shall be

January first, nineteen hundred eighty-eight, or the operative date of

this act for the company, whichever is earlier.

(n-2) Notwithstanding any other provision of this section, any policy

that provides for the crediting of additional amounts pursuant to

subsection (b) of section four thousand two hundred thirty-two of this

article may provide for cash surrender benefits determined in accordance

with a market-value adjustment formula, provided, however, that such

policy provides for cash surrender benefits determined without

adjustment in accordance with such a formula at specified times (which

shall not be less frequent than once every ten years after issuance of

the policy). For purposes hereof, "market-value adjustment formula"

means a formula which is described in the policy for increasing and

decreasing cash surrender values that would otherwise meet the minimum

requirements of subsection (n-1) of this section and which takes into

account (1) changes in interest rates on publicly-traded obligations or

other investments or in interest rates provided in, or declared pursuant

to, policies of the same class as the policy being surrendered and (2)

the length of time between the date on which the policy is surrendered

and the next date on which the policy would have provided cash surrender

benefits determined without the use of any market-value adjustment

formula. The superintendent may promulgate reasonable regulations to

define permissible forms or market-value adjustment formulae.

(o) (1) This section shall not apply to any of the following:

(A) Reinsurance.

(B) Group insurance.

(C) Group annuity contract.

(D) A single premium pure endowment or annuity contract.

(E) A reversionary annuity contract.

(F) A term policy of uniform amount, which provides no guaranteed

nonforfeiture or endowment benefits, or renewal thereof, of thirty years

or less expiring before age eighty-one, for which uniform premiums are

payable during the entire term of the policy.

(G) A term policy of decreasing amount, which provides no guaranteed

nonforfeiture or endowment benefits, on which each adjusted premium,

calculated as specified in subsections (g), (h), (i) and (k) hereof, is

less than the adjusted premium so calculated, on a term policy of

uniform amount, or renewal thereof, which provides no guaranteed

nonforfeiture or endowment benefits, issued at the same age and for the

same initial amount of insurance, and for a term of twenty years or less

expiring before age seventy-one, for which uniform premiums are payable

during the entire term of the policy.

(H) A policy, which provides no guaranteed nonforfeiture or endowment

benefits, for which no cash surrender value, if any, or present value of

any paid-up nonforfeiture benefit, at the beginning of any policy year,

calculated as specified in subsections (c), (d), (g), (h), (i) and (k)

hereof, exceeds two and one-half percent of the amount of insurance at

the beginning of the same policy year.

(I) A policy or contract delivered outside this state through an agent

or other representative of the company issuing the policy or through a

broker.

(2) For purposes of determining the applicability of this section, the

age at expiry for a joint term life insurance policy shall be the age at

expiry of the oldest life.

(p) (1) Any company may file with the superintendent a written notice

of its election to comply with the provisions of this section after a

specified date before January first, nineteen hundred forty-eight.

(2) After the filing of such notice, then upon such specified date

(which shall be the operative date for such company), this section shall

become operative with respect to the policies and contracts thereafter

issued by such company. If a company makes no such election, the

operative date of this section for such company shall be January first,

nineteen hundred forty-eight.

(q) The provisions of this section shall not apply to any policy

qualified for special tax treatment under subsection (b) of section four

hundred three of the Internal Revenue Code of 1986, as amended, to the

extent such application would prevent such qualification.