Iowa Administrative Code › Agency 191 - Insurance Division › Insurance Coverage for Pediatric Preventive Services › Chapter 92 - Universal Life Insurance › Rule 191-92.5 - Nonforfeiture

Current through Register Vol. 47, No. 3, July 24, 2024
Minimum cash surrender values for flexible premium
				  universal life insurance policies.
a. Minimum cash surrender values for flexible
				premium universal life insurance policies shall be determined separately for
				the basic policy and any benefits and riders for which premiums are paid
				separately.
b. The following
				requirements pertain to a basic policy and any benefits and riders for which
				premiums are not paid separately.
(1) 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
				shall be equal to the accumulation to that date of the premiums paid minus the
				accumulations to that date of (a) the benefit charges; (b) the averaged
				administrative expense charges for the first policy year and any
				insurance-increase years; (c) actual administrative expense charges for other
				years; (d) initial and additional acquisition expense charges not exceeding the
				initial or additional expense allowances, respectively; (e) any service charges
				actually made (excluding charges for cash surrender or election of a paid-up
				nonforfeiture benefit); and (f) any deductions made for partial withdrawals;
				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), and
				minus any unamortized unused initial and additional expense
				allowances.
(2) Interest on the
				premiums and on all charges referred to in (a) through (f) in subparagraph (1)
				above shall be accumulated from and to such dates as are consistent with the
				manner in which interest is credited in determining the policy value.
(3) 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
				commissioner 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 other characteristics.
(4) 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
				charges, and any other charges permitted by the policy to be imposed without
				regard to the policyowner's request for services.
(5) 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 states will be imposed in policy years two through twenty in
				determining the policy value.
(6)
				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 request (or by the terms of the policy).
(7) Service charges shall include charges
				permitted by the policy to be imposed as a result of a policyowner's request
				for a service by the insurer (such as the furnishing of future benefit
				illustrations) or of special transactions.
(8) The initial expense allowance shall be
				the allowance provided by Iowa Code section
				50837(5)(a)(2)
				through (4). or by Iowa Code section
				50837(6)(a)(2)
				and (3). 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, 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.
(9) If
				the amount of insurance is subsequently increased upon request of the
				policyowner (or by the terms of the policy), an additional expense allowance
				and an unused additional expense allowance shall be determined on a basis
				consistent with subparagraph (8) and with Iowa Code section
				50837(6)(e).,
				using the face amount and the latest maturity date permitted at that time under
				the policy.
(10) The unamortized
				unused initial expense allowance during the policy year beginning on the policy
				anniversary at age x+t (where "x" is the same issue age) shall be the unused
				initial expense allowance multiplied by
Ã¤x+t/x,
where
Ã¤x+t
and
Ã¤x
are present values of an
				annuity of one per year payable on policy 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, both on the mortality and interest bases
				guaranteed in the policy. An unamortized unused additional expense allowance
				shall be the unused additional expense allowance multiplied by a similar ratio
				of annuities, with
Ã¤x
replaced by
				an annuity beginning on the date as of which the additional expense allowance
				was determined.
Minimum cash surrender values for fixed premium
				  universal life insurance policies.
For fixed premium universal life
				  insurance policies, the minimum cash surrender values shall be determined
				  separately for the basic policy and any benefits and riders for which premiums
				  are paid separately. The following requirements pertain to a basic policy and
				  any benefits and riders for which premiums are not paid separately:
a. 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 shall be equal to [(A) - (B) - (C) -
				(D)], where:
(A)is the present value of all
				future guaranteed benefits;
(B) is
				the present value of future adjusted premiums. The adjusted premiums are
				calculated as described in Iowa Code section
				50837(5)(a).
				or Iowa Code section
				50837(6)(a).,
				as applicable. If Iowa Code section
				50837(6)(a).
				is applicable, the nonforfeiture net level premium is equal to the
				quantity
PVFB/Ã¤x,
where PVFB is the
				present value of all benefits guaranteed at issue assuming future premiums are
				paid by the policyowner and all guarantees contained in the policy or declared
				by the insurer;
Ã¤x
is the
				  present value of an annuity of one per year payable on policy anniversaries
				  beginning at age X and continuing until the highest attained age at which a
				  premium may be paid under the policy;
(C) is the present value of any quantities
				analogous to the nonforfeiture net level premium which arise because of
				guarantees declared by the insurer after the issue date of the
				policy;
Ã¤x
shall be replaced by an
				annuity beginning on the date as of which the declaration became effective and
				payable until the end of the period covered by the declaration;
(D)is the sum of any quantities analogous to
				(B) which arise because of structural changes in the policy.
b. Future guaranteed benefits are
				determined by:
(1) projecting the policy
				value, taking into account future premiums, if any, and using all guarantees of
				interest, mortality, expense deductions, etc. contained in the policy or
				declared by the insurer; and
(2)
				taking into account any benefits guaranteed in the policy or by declaration
				which do not depend on the policy value.
c. All present values shall be determined
				using:
(1) an interest rate (or rates)
				specified by Iowa Code section
				50837(5) and
				(6). for policies issued in the same year;
				and
(2) the mortality rates
				specified by Iowa Code section
				50837(5) and
				(6). for policies issued in the same year or contained
				in such other table as may be approved by the commissioner for this purpose.