Illinois Administrative Code › Title 50 - INSURANCE › Part 1411 - UNIVERSAL LIFE INSURANCE › Section 1411.40 - Nonforfeiture

Current through Register Vol. 48, No. 28, July 12, 2024
a) Minimum Cash
			 Surrender Values for Flexible Premium Universal Life Insurance Policies
1) Minimum cash surrender values for flexible
			 premium universal life insurance policies shall be determined separately for
			 the basic policy or group certificate and any benefits and riders for which
			 premiums are paid separately. The following requirements pertain to a basic
			 policy or group certificate and any benefits and riders for which premiums are
			 not paid separately.
2) The minimum
			 cash surrender value (before adjustment for indebtedness and dividend credits)
			 available on a date as of which interest is credited to the policy or group
			 certificate shall be equal to:
A) The
			 accumulation to that date of the premiums paid minus the accumulations (all
			 accumulations being at the actual rate or rates of interest at which interest
			 credits have been made unconditionally to the policy; or have been made
			 conditionally, but for which the conditions have since been met) to that date
			 of:
i) The benefit charges;
ii) The averaged administrative expense
			 charges for the first policy year and any insurance-increase years;
iii) Actual administrative expense charges
			 for other years;
iv) Initial and
			 additional acquisition expense charges not exceeding the initial or additional
			 expense allowances, respectively;
v) Any service charges actually made
			 (excluding charges for cash surrender or election of a paid-up nonforfeiture
			 benefit); and
vi) Any deductions
			 made for partial withdrawals,
B) Minus any unamortized unused initial and
			 additional expense allowances.
3) Interest on the premiums and on all
			 charges referred to in subsections (a)(2)(A)(i) through (vi) of this Section
			 shall be accumulated from and to such dates as are consistent with the manner
			 in which interest is credited in determining the policy value.
4) The benefit charges shall include the
			 charges made for mortality and any charges made for riders or supplementary
			 benefits for which premiums are not paid separately. If benefit charges are
			 substantially level by duration and develop low or no cash values, then the
			 Director shall have the right to require higher cash values unless the insurer
			 provides adequate justification that the cash values are appropriate in
			 relation to the policy's or group certificate's other
			 characteristics.
5) The
			 administrative expense charges shall include charges per premium payment,
			 charges per dollar of premium paid, periodic charges per thousand dollars of
			 insurance, periodic per policy or group certificate charges, and any other
			 charges permitted by the policy or group certificate to be imposed without
			 regard to the policyowner's or group certificateholder's request for
			 services.
6) The averaged
			 administrative expense charges for any year shall be those which would have
			 been imposed in that year if the charge rate or rates for each transaction or
			 period within the year had been equal to the arithmetic average of the
			 corresponding charge rates which the policy or group certificate states will be
			 imposed in policy years 2 through 20 in determining the policy value.
7) The initial acquisition expense charges
			 shall be the excess of the expense charges, other than service charges,
			 actually made in the first policy year over the averaged administrative expense
			 charges for that year. Additional acquisition expense charges shall be the
			 excess of the expense charges, other than service charges, actually made in an
			 insurance-increase year over the averaged administrative expense charges for
			 that year. An insurance-increase year shall be the year beginning on the date
			 of increase in the amount of insurance by policyowner or group
			 certificateholder request (or by the terms of the policy or group
			 certificate).
8) Service charges
			 shall include charges permitted by the policy or group certificate to be
			 imposed as the result of a policyowner's or group certificateholder's request
			 for a service by the insurer (such as the furnishing of future benefit
			 illustrations) or of special transactions.
9) The initial expense allowance shall be the
			 allowance provided by Section
			 229.2(4c)(a) of
			 the Code for a fixed premium, fixed benefit endowment policy with a face amount
			 equal to the initial face amount of the flexible premium universal life
			 insurance policy, with level premiums paid annually until the highest attained
			 age at which a premium may be paid under the flexible premium universal life
			 insurance policy, and maturing on the latest maturity date permitted under the
			 policy or group certificate, if any, otherwise at the highest age in the
			 valuation mortality table. The unused initial expense allowance shall be the
			 excess, if any, of the initial expense allowance over the initial acquisition
			 expense charges as defined above.
10) If the amount of insurance is
			 subsequently increased upon request of the policyowner or group
			 certificateholder (or by the terms of the policy or group certificate), an
			 additional expense allowance and an unused additional expense allowance shall
			 be determined on a basis consistent with the above and with Section
			 229.2(4c)(e) of
			 the Code, using the face amount and the latest maturity date permitted at that
			 time under the policy or group certificate.
11) The unamortized unused initial expense
			 allowance during the policy year beginning on the policy or group certificate
			 anniversary at age x+t (where "x" is the same issue age) shall be the unused
			 initial expense allowance multiplied by
			 ax+t/ax where
			 ax+t and ax are present values of
			 an annuity of 1 per year payable on policy or group certificate anniversaries
			 beginning at ages x+t and x, respectively, and continuing until the highest
			 attained age at which a premium may be paid under the policy or group
			 certificate, both on the mortality and interest bases guaranteed in the policy
			 or group certificate. An unamortized unused additional expense allowance shall
			 be the unused additional expense allowance multiplied by a similar ratio of
			 annuities, with ax replaced by an annuity beginning on
			 the date as of which the additional expense allowance was determined.