Texas Administrative Code › Title 28 - INSURANCE › Part 1 - TEXAS DEPARTMENT OF INSURANCE › Chapter 3 - LIFE, ACCIDENT, AND HEALTH INSURANCE AND ANNUITIES › Subchapter CC - STANDARDS FOR ACCELERATION-OF-LIFE-INSURANCE BENEFITS FOR INDIVIDUAL AND GROUP POLICIES AND RIDERS › Section 3.4306 - Methods for Determining Benefits and Allowable Charges and Fees

Current through Reg. 49, No. 28; July 12, 2024
The acceptable methods for determining an
					 acceleration-of-life-insurance benefit, and allowable charges and fees
					 associated with the benefit, are as specified in this section.
(1) Additional Premium or Cost of Insurance
				  Charge Method. The acceleration-of-life-insurance benefit provision must
				  specify and define any separately identifiable additional premium or
				  cost-of-insurance charge, if applicable to the life insurance contract, for any
				  acceleration-of-life-insurance benefit, and, upon payment of such benefit,
				  reduce the death benefit of the contract in an amount equal to the
				  acceleration-of-life-insurance benefit paid.
(2) Actuarial Discount Methods. The
				  acceleration-of-life-insurance benefit provision must specify or define any
				  administrative fee, not to exceed $150, and any sound and reasonable actuarial
				  discount, calculated in accordance with either subparagraph (A) or (B) of this
				  paragraph, as applicable, which may reduce the amount of the
				  acceleration-of-life-insurance benefit in instances where no additional premium
				  or cost-of-insurance charge is payable in advance by the policy or certificate
				  holder. Upon payment of such benefit, the death benefit of the life insurance
				  contract will be reduced by no more than an amount equal to the
				  acceleration-of-life-insurance benefit paid, plus the actuarial discount and
				  any administrative fee deducted to provide the benefit. Each subsequently
				  approved acceleration-of-life-insurance benefit request may provide for an
				  administrative fee and discount, subject to the limits defined in this
				  paragraph. The acceleration-of-life-insurance benefit may be calculated based
				  on either the present value actuarial discount as described in subparagraph (A)
				  of this paragraph, or, in regards to an insured with a terminal illness, on the
				  interest-only actuarial discount as described in subparagraph (B) of this
				  paragraph.
(A) Present Value Actuarial
				  Discount. The acceleration-of-life-insurance benefit may be based upon the
				  present value of future benefits provided under the life insurance contract,
				  less the present value of future premiums, plus the present value of future
				  dividends, if applicable. The actuarial discount used to reach this present
				  value calculation must be appropriate to the life insurance contract design and
				  based on sound actuarial principles. For an insured with a terminal illness,
				  the present value actuarial discount shall not reduce the amount of benefits
				  accelerated by more than 15% of the face amount of such benefits. For other
				  insureds eligible for acceleration-of-life-insurance benefits, the interest
				  rate used to derive the present value actuarial discount applied to the face
				  amount of the benefits accelerated shall not exceed the greater of:
(i) the current yield on 90 day treasury
				  bills;
(ii) the current maximum
				  adjustable policy loan interest rate based on Moody's Corporate Bond Yield
				  Averages, or any successor thereto;
(iii) the life insurance contract's
				  guaranteed cash value interest rate plus one percent per annum; or
(iv) an alternate rate approved by the
				  Commissioner.