North Dakota Administrative Code › Title 45 - Insurance, Commissioner of › Article 45-04 - Life Insurance › Chapter 45-04-01 - Life Insurance Solicitation › Section 45-04-01-03 - Definitions

Current through Supplement No. 393, July, 2024
For the purposes of this chapter, the following definitions
				  shall apply:
1. "Buyer's guide" means the current version of the national
				  association of insurance commissioners life insurance buyer's guide or language
				  approved by the insurance commissioner.
2. "Cash dividend" means the current illustrated dividend
				  which can be applied toward payment of the gross premium.
3. "Equivalent level annual dividend" is calculated by
				  applying the following steps:
a. Accumulate the annual cash dividends at five percent
				  interest compounded annually to the end of the tenth and twentieth policy
				  years.
b. Divide each accumulation in subdivision a by an interest
				  factor that converts it into one equivalent level annual amount that, if paid
				  at the beginning of each year, would accrue to the values in subdivision a over
				  the respective periods stipulated in subdivision a. If the period is ten years,
				  the factor is 13.207, and if the period is twenty years, the factor is 34.719.
c. Divide the results of subdivision b by the number of
				  thousands of the equivalent level death benefit to arrive at the equivalent
				  level annual dividend.
4. "Equivalent level death benefit" of a policy or term life
				  insurance rider is an amount calculated as follows:
a. Accumulate the guaranteed amount payable upon death,
				  regardless of the cause of death, at the beginning of each policy year for ten
				  and twenty years at five percent interest compounded annually to the end of the
				  tenth and twentieth policy years respectively.
b. Divide each accumulation of subdivision a by an interest
				  factor that converts it into one equivalent level annual amount that, if paid
				  at the beginning of each year, would accrue to the value in subdivision a over
				  the respective periods stipulated in subdivision a. If the period is ten years,
				  the factor is 13.207, and if the period is twenty years, the factor is 34.719.
5. "Generic name" means a short title which is descriptive of
				  the premium and benefit patterns of a policy or a rider.
6. "Life insurance cost indexes" are calculated as follows:
a. "Life insurance net payment cost index" is calculated in
				  the same manner as the comparable life insurance cost index except that the
				  cash surrender value and any terminal dividend are set at zero.
b. "Life insurance surrender cost index" is calculated by
				  applying the following steps:
(1) Determine the guaranteed cash surrender value, if any,
				  available at the end of the tenth and twentieth policy years.
(2) For participating policies, add the terminal dividend
				  payable upon surrender, if any, to the accumulation of the annual cash
				  dividends at five percent interest compounded annually to the end of the period
				  selected and add this sum to the amount determined in paragraph 1.
(3) Divide the result of paragraph 2. (Paragraph 1 for
				  guaranteed-cost policies) by an interest factor that converts it into an
				  equivalent level annual amount that, if paid at the beginning of each year,
				  would accrue to the value in paragraph 2. (Paragraph 1 for guaranteed-cost
				  policies) over the respective periods stipulated in paragraph 1. If the period
				  is ten years, the factor is 13.207, and if the period is twenty years, the
				  factor is 34.719.
(4) Determine the equivalent level premium by accumulating
				  each annual premium payable for the basic policy or rider at five percent
				  interest compounded annually to the end of the period stipulated in paragraph 1
				  and dividing the result by the respective factors stated in paragraph 3. (This
				  amount is the annual premium payable for a level premium plant.)
(5) Subtract the result of paragraph 3 from paragraph 4.
(6) Divide the result of paragraph 5 by the number of
				  thousands of the equivalent level death benefit to arrive at the life insurance
				  surrender cost index.
7. "Policy summary" means a basic illustration as defined in
				  chapter 45-04-01.1 for policy forms for which the company chooses to illustrate
				  under 45-04-01.1, otherwise it means a written statement using elements
				  guaranteed in the policy only describing the elements of the policy including:
a. A prominently placed title as follows: "STATEMENT OF
				  POLICY COST AND BENEFIT INFORMATION".
b. The name and address of the insurance agent, or if no
				  agent is involved, a statement of the procedure to be followed in order to
				  receive responses to inquiries regarding the policy summary.
c. The full name and home office or administrative office
				  address of the company in which the life insurance policy is to be or has been
				  written.
d. The generic name of the basic policy and each rider.
e. The following amounts, where applicable, for the first
				  five policy years and representative policy years thereafter sufficient to
				  clearly illustrate the premium and benefit patterns, including, but not
				  necessarily limited to, the years for which life insurance cost indexes are
				  displayed and at least one age from sixty through sixty-five or maturity,
				  whichever is earlier:
(1) The annual premium for the basic policy.
(2) The annual premium for each optional rider.
(3) The guaranteed amount payable upon death, at the
				  beginning of the policy year regardless of the cause of death, other than
				  suicide, or other specifically enumerated exclusions, which is provided by the
				  basic policy and each optional rider, with benefits provided under the basic
				  policy and each rider shown separately.
(4) The total guaranteed cash surrender values at the end of
				  the year with values shown separately for the basic policy and each rider.
(5) The cash dividends payable at the end of the year with
				  value shown separately for the basic policy and each rider. (Dividends need not
				  be displayed beyond the twentieth policy year.)
(6) The guaranteed endowment amounts payable under the policy
				  which are not included under guaranteed cash surrender values above.
f. The effective policy loan annual percentage interest rate,
				  if the policy contains this provision, specifying whether this rate is applied
				  in advance or in arrears. If the policy loan interest rate is variable, the
				  policy summary includes the maximum annual percentage rate.
g. Life insurance cost indexes for ten and twenty years but
				  in no case beyond the premium paying period. Separate indexes are displayed for
				  the basic policy and for each optional term life insurance rider. Such indexes
				  need not be included for optional riders which are limited to benefits such as
				  accidental death benefits, disability waiver of premium, preliminary term life
				  insurance coverage of less than twelve months and guaranteed insurability
				  benefits nor for the basic policies or optional riders covering more than one
				  life.
h. The equivalent level annual dividend, in the case of
				  participating policies and participating optional term life insurance riders,
				  under the same circumstances and for the same durations at which life insurance
				  cost indexes are displayed.
i. A policy summary which includes dividends shall also
				  include a statement that dividends are based on the company's current dividend
				  scale and are not guaranteed in addition to a statement in close proximity to
				  the equivalent level annual dividend as follows: "An explanation of the
				  intended use of the Equivalent Level Annual Dividend is included in the Life
				  Insurance Buyer's Guide."
j. A statement in close proximity to the life insurance costs
				  indexes as follows: "An explanation of the intended use of these indexes is
				  provided in the Life Insurance Buyer's Guide."
k. The date on which the policy summary is prepared.
The policy summary must consist of a separate document. All
				  information required to be disclosed must be set out in such a manner as to not
				  minimize or render any portion thereof obscure. Any amounts which remain level
				  for two or more years of the policy may be represented by a single number if it
				  is clearly indicated what amounts are applicable for each policy year. Amounts
				  in subdivision e shall be listed in total, not on a per thousand nor per unit
				  basis. If more than one insured is covered under one policy or rider,
				  guaranteed death benefits shall be displayed separately for each insured or for
				  each class of insureds if death benefits do not differ within the class. Zero
				  amounts shall be displayed as zero and shall not be displayed as a blank space.
General Authority: NDCC 28-32-02
Law Implemented: NDCC 26.1-01-08,
					 26.1-33-02