Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 3 - LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES › Subchapter Y - STANDARDS FOR LONG-TERM CARE INSURANCE, NON-PARTNERSHIP AND PARTNERSHIP LONG-TERM CARE INSURANCE COVERAGE UNDER INDIVIDUAL AND GROUP POLICIES AND ANNUITY CONTRACTS, AND LIFE INSURANCE POLICIES THAT PROVIDE LONG-TERM CARE BENEFITS WITHIN THE POLICY › Division 2 - NON-PARTNERSHIP AND PARTNERSHIP LONG-TERM CARE INSURANCE › Section 3.3848 - Requirements for Limited Premium Payment Options in Long-Term Care Policies, Certificates, and Riders

Current through Reg. 49, No. 28; July 12, 2024
(a) Definition and
					 Applicability. Long-term care policies, certificates, and riders with limited
					 premium payment options limit premium payments to a single payment or to a
					 stated number of years not to exceed 10 years. Limited premium payment
					 policies, certificates, and riders must comply with this subchapter, Subchapter
					 A of this chapter (relating to Submission Requirements for Filings and
					 Departmental Actions Related to Such Filings), and the additional requirements
					 specified in subsection (b) of this section. Any policy, certificate or rider
					 that contains a paid-up option at a specified age and becomes paid up in 10
					 years or less is subject to this section. Nothing in this section prohibits a
					 carrier from offering premium payment duration options in excess of 10 years,
					 and any such options are not subject to this section.
(b) Requirements.
(1) Notice. A long-term care insurance policy
					 or certificate with a limited premium payment option must accurately reflect a
					 plan with a limited premium payment option.
(2) Minimum Standards. The provisions in
					 long-term care policies, certificates, and riders with limited premium payment
					 options must be at least as favorable as the requirements and provisions
					 specified in this section.
(3)
					 Single-Premium Payment Option. A single-premium payment option policy,
					 certificate, or rider must be noncancellable as provided in §
												3.3810(a)
					 of this subchapter (relating to Policy or Certificate Standards for
					 Noncancellability). The renewability provision on the face page of the policy
					 or certificate must conform with the following: "NONCANCELLATION PROVISION:
					 This policy provides that premiums are paid by a single premium after which no
					 additional premiums are due and your policy is fully paid-up and
					 noncancellable. We cannot cancel your policy and we cannot make any changes
					 unless requested by you, subject to the maximum benefits under the policy." In
					 the alternative, the required renewability provision may be added to the policy
					 via an endorsement and change to the schedule page.
(4) One-to-Four Year Premium Payment Options.
					 A long-term care policy, certificate, or rider with a one-to-four year premium
					 payment option must be noncancellable as provided in §
												3.3810(a)
					 of this subchapter. The renewability provision on the face page of a policy or
					 certificate must conform with the following: "NONCANCELLATION PROVISION: This
					 policy provides that your premiums may be paid over a period of [n] (n may
					 equal 1, 2, 3, or 4) years, after which no additional premiums will be due and
					 your policy is fully paid up and noncancellable. We cannot cancel your policy
					 and we cannot make any changes unless requested by you, subject to the maximum
					 benefits under the policy." In the alternative, the required renewability
					 provision may be added to the policy via an endorsement and change to the
					 schedule page.
(5) Five-to-Ten Year
					 Premium Payment Options. A long-term care policy, certificate or rider with a
					 five-to-ten year premium payment option must be guaranteed renewable as
					 provided in §
												3.3807(a)
					 of this subchapter (relating to Policy or Certificate Standards for Guaranteed
					 Renewability) and must comply with the following requirements:
(A) The renewability provision on the face
					 page of a long-term care policy or certificate must conform to the following:
					 "This policy provides that your premiums be paid over a period of [n] (n may
					 equal 5, 6, 7, 8, 9 or 10) years, after which no additional premiums will be
					 due and your policy is fully paid-up and noncancellable. We cannot cancel your
					 policy and we cannot make any changes unless requested by you, subject to the
					 maximum benefits under the policy." In the alternative, the required
					 renewability provision may be added to the policy via an endorsement and change
					 to the schedule page.
(B) A
					 provision must be included in the policy, certificate or rider that provides
					 for a return of premium upon cancellation, as described in Figure: 28 TAC
					 § 3.3848(b)(5)(C)(ii).
(C)
					 Each long-term care policy, certificate or rider must be accompanied by the
					 disclosure specified in clause (i) of this subparagraph and the Return of
					 Premium chart specified in Figure: 28 TAC § 3.3848(b)(5)(C)(ii).
(i) Disclosure. The return of premium
					 provision must conform with the following: "RETURN OF PREMIUM: Upon
					 cancellation of this policy by you during the premium-paying period, we will
					 return a portion of the total premiums paid less any benefits paid under the
					 policy. The portion of the total premium paid will be determined in accordance
					 with the accompanying chart, labeled Return of Premium Schedule."
(ii) Return of Premium Schedule. The return
					 of Premium Schedule chart, which specifies the percentage of premium that the
					 insurer is required to return to the insured expressed as a function of the
					 premium payment option (5, 6, 7, 8, 9, and 10 year premium payment options) and
					 of the number of completed years prior to the policy, certificate or rider
					 being canceled, must comply with the following requirements:
Attached
						Graphic
(I) The chart must
					 be in not less than 12-point bold type.
(II) The chart must conform to the
					 representation in Figure: 28 TAC § 3.3848(b)(5)(C)(ii), and must be
					 labeled "Return of Premium Schedule."
(iii) Under no circumstances shall the
					 application of Figure: 28 TAC § 3.3848(b)(5)(C)(ii) result in an amount
					 that exceeds the aggregate premiums paid under the contract, when combined with
					 any other provision of this chapter.
(D) Using the Return of Premium Chart
					 specified in Figure: 28 TAC § 3.3848(b)(5)(C)(ii), the return of premium
					 amount must be at least as great as the sum of clause (i) plus clause (ii)
					 minus clause (iii) of this subparagraph:
(i)
					 [(I) - (II)] X (III), where (I), (II) and (III) are as follows:
(I) the cumulative premium paid under the
					 limited premium payment option specified in the policy, certificate, or
					 rider;
(II) the cumulative premium
					 that would have been paid under a lifetime premium payment option;
(III) the percentage specified in Figure: 28
					 TAC § 3.3848(b)(5)(C)(ii), corresponding to the number of completed policy
					 years and limited premium payment period specified in the policy, certificate,
					 or rider;
(ii) the
					 pro-rata unearned premium based on the premium paid for the year of
					 cancellation;
(iii) any benefits
					 paid under the policy.
(E) An example of the calculation of the
					 return of premium required under this section is as follows:
(i) Given the facts provided in subclauses
					 (I), (II), (III), and (IV) of this clause as follows:
(I) policy, certificate, or rider issue date:
					 January 1, 2006;
(II) date of
					 cancellation: April 1, 2008;
(III)
					 10-pay annual premium: $10,000;
(IV) annual lifetime premium:
					 $1,000;
(ii) Portion of
					 return of premium calculated under subparagraph (D)(i) of this paragraph is
					 equal to .05 X [($10,000 + $10,000) - ($1,000 + $1,000)] = .05 X ($20,000 -
					 $2,000) = .05 X $18,000 = $900;
(iii) Portion of return of premium calculated
					 under subparagraph (D)(ii) of this paragraph is equal to $10,000 X 9/12 =
					 $7,500;
(iv) Total return of
					 premium due is equal to $900 + $7,500 = $8,400 less any benefits paid under the
					 policy.