The Commissioner shall not approve any variable life
insurance form filed pursuant to this Regulation unless it conforms to the
following requirements of this Rule:
(2)
Mandatory Policy Benefit and Design Requirements. Variable life insurance
policies delivered or issued for delivery in this State shall comply with the
following minimum requirements:
(a) Mortality
and expense risks shall be borne by the insurer. The mortality and expense
charges shall be subject to the maximum stated in the contract.
(b) For scheduled premium policies, a minimum
death benefit shall be provided in an amount at least equal to the initial face
amount of the policy so long as premiums are duly paid, subject to the
provisions of Section (3)(b) of this Rule;
(c) The policy shall reflect the investment
experience of one or more separate accounts established and maintained by the
insurer. The insurer must demonstrate that the variable life insurance policy
is actuarially sound.
(d) Each
variable life insurance policy shall be credited with the full amount of the
net investment return applied to the benefit base.
(e) Any changes in variable death benefits of
each variable life insurance policy shall be determined at least
annually.
(f) The cash value of
each variable life insurance policy shall be determined at least monthly. The
method of computation of cash values and other nonforfeiture benefits, as
described either in the policy or in a statement filed with the Commissioner,
shall be in accordance with actuarial procedures that recognize the variable
nature of the policy. The method of computation may disregard incidental
minimum guarantees as to the dollar amounts payable. Incidental minimum
guarantees include, for example, but are not limited to, a guarantee that the
amount payable at death or maturity shall be at least equal to the amount that
otherwise would have been payable if the net investment return credited to the
policy at all times from the date of issue had been equal to the assumed
investment rate.
(g) The
computation of values required for each variable life insurance policy may be
based upon such reasonable and necessary approximations as are acceptable to
the Commissioner.
(3)
Mandatory Policy Provisions. Every variable life insurance policy filed for
approval in this State shall contain at least the following:
(a) the cover page or pages corresponding to
the cover page of each such policy shall contain:
1. a statement in boldface type which is at
least four points larger than the type size of the largest type used in the
text of any provision on that page, that the amount or duration of death
benefit may be variable or fixed under specified conditions. Such statement
shall be set forth in a separate paragraph;
2. a statement in boldface type which is at
least four points larger than the type size of the largest type used in the
text of any provision on that page that cash values may increase or decrease in
accordance with the experience of the separate account subject to any specified
minimum guarantees. Such statement shall be set forth in a separate
paragraph;
3. a statement
describing any minimum death benefit required pursuant to Section (2)(b) of
Rule
120-2-32-.05;
4. the method, or a reference to the policy
provision which describes the method, for determining the amount of insurance
payable at death;
5. a captioned
provision which provides that the policyholder may return the variable life
insurance policy within ten (10) days or such longer period as required by law
of the receipt of the policy by the policyholder, and receive a refund of the
total premium payments; and
6. such
other items as are currently required for fixed benefit life insurance policies
and which are not inconsistent with this Regulation.
(b)
1.For
scheduled premium policies, a provision for a grace period of not less than
thirty-one (31) days from the premium due date which shall provide that where
the premium is paid within the grace period, policy values will be the same,
except for the deduction of any overdue premium, as if the premium were paid on
or before the due date;
2. For
flexible premium policies, a provision for a grace period beginning on the
policy processing day when the total charges authorized by the policy that are
necessary to keep the policy in force until the next policy processing day
exceed the amounts available under the policy to pay such charges in accordance
with the terms of the policy. Such grace period shall end on a date not less
than sixty-one (61) days after the mailing date of the Report to Policyholders
required by Section (3) of Rule
120-2-32-.10.
The death benefit payable during the grace period will equal
the death benefit in effect immediately prior to such period less any overdue
charges. If the policy processing days occur monthly, the insurer may require
the payment of not more than three (3) times the charges which were due on the
policy processing day on which the amounts available under the policy were
insufficient to pay all charges authorized by the policy that are necessary to
keep such policy in force until the next policy processing day.
(c) For scheduled
premium policies, a provision that the policy will be reinstated at any time
within two years from the date of default upon the written application of the
insured and evidence of insurability, including good health, satisfactory to
the insurer, unless the cash surrender value has been paid or the period of
extended insurance has expired, upon the payment of any outstanding
indebtedness arising subsequent to the end of the grace period following the
date of default together with accrued interest thereon to the date of
reinstatement and payment of an amount not exceeding the greater of:
1. all overdue premiums with interest at a
rate not exceeding six percent (6%) per annum compounded annually and any
indebtedness in effect at the end of the grace period following the date of
default with interest at a rate not exceeding six percent (6%) per annum
compounded annually; or
2. one
hundred ten percent (110%) of the increase in cash surrender value resulting
from reinstatement plus all overdue premiums for incidental insurance benefits
with interest at a rate not exceeding six percent (6%) per annum compounded
annually.
(d) a full
description of the benefit base and of the method of calculation and
application of any factors used to adjust variable benefits under the
policy;
(e) a provision designating
the separate account to be used and stating that:
1. the assets of such separate account shall
be available to cover the liabilities of the general account of the insurer
only to the extent that the assets of the separate account exceed the
liabilities of the separate account arising under the variable life insurance
policies supported by the separate account; and
2. the assets of such separate account shall
be valued at least as often as any policy benefits vary but at least
monthly.
(f) a provision
that at any time during the first eighteen (18) months of the variable life
insurance policy, so long as premiums are duly paid the owner may exchange the
policy for a policy of permanent fixed benefit life insurance on the life of
the insured for the same initial amount of insurance as the variable life
insurance policy, and on a plan of insurance specified in the policy, provided
that the new policy:
1. shall bear the same
date of issue and age at issue as the original life insurance policy;
2. is issued on a substantially comparable
plan of permanent insurance offered in this State by the insurer or an
affiliate on the date of issue of the variable life insurance policy and at the
premium rates in effect on the date for the same class of insurance;
3. includes such riders and incidental
insurance benefits as were included in the original policy if such riders and
incidental insurance benefits are issued with the fixed benefit
policy;
4. shall be issued subject
to an equitable premium or cash value adjustment that takes appropriate account
of the premiums and cash values under the original and new policies. A detailed
statement of the method of computing such adjustment shall be filed with the
Commissioner.
(g) a
provision that the policy and any papers attached thereto by the insurer,
including the application if attached, constitute the entire insurance
contract;
(h) a designation of the
officers who are empowered to make an agreement or representation on behalf of
the insurer and an indication that statements by the insured, or on his behalf,
shall be considered as representations and not warranties;
(i) an identification of the owner of the
insurance contract;
(j) a provision
setting forth conditions or requirements as to the designation, or change of
designation, of a beneficiary and a provision for disbursement of benefits in
the absence of a beneficiary designation;
(k) a statement of any conditions or
requirements concerning the assignment of the policy;
(l) a description of any adjustments in
policy values to be made in the event of misstatement of age or sex of the
insured;
(m) a provision that the
policy shall be incontestable by the insurer after it has been in force for two
(2) years during the lifetime of the insured; provided, however, that any
increase in the amount of the policy's death benefits subsequent to the policy
issue date, which increase occurred upon a new application or request of the
owner and was subject to satisfactory proof of the insured's insurability,
shall be incontestable after any such increase has been in force, during the
lifetime of the insured, for two (2) years from the date of issue of such
increase;
(n) a provision stating
that the investment policy of the separate account shall not be changed without
the approval of the Insurance Commissioner of the state of domicile of the
insurer, and that the approval of process is on file with the Commissioner of
Insurance of Georgia;
(o) a
provision that payment of variable death benefits in excess of any minimum
death benefits, cash values, policy loans, or partial withdrawals (except when
used to pay premiums) or partial surrenders may be deferred:
1. for up to six (6) months from the date of
request, if such payments are based on policy values which do not depend on the
investment performance of the separate account, or
2. otherwise, for any period during which the
New York Stock Exchange is closed for trading (except for normal holiday
closing) or when the Securities and Exchange Commission has determined that a
state of emergency exists which may make such payment impractical.
(p) if settlement options are
provided at least one such option shall be provided on a fixed basis
only;
(q) a description of the
basis for computing the cash value and the surrender value under the policy
shall be included.
(r) premiums or
charges for incidental insurance benefits shall be stated separately;
(s) any other policy provisions required by
this Regulation;
(t) such other
items as are currently required for fixed benefit life insurance policies and
are not inconsistent with this Regulation; and
(u) a provision for nonforfeiture insurance
benefits which may include a reasonable minimum cash value below which reduced
paid-up insurance, extended term insurance and settlement options will not be
available. The policy may not provide for a minimum cash surrender
value.
(4) Policy Loan
Provisions. Every variable life insurance policy, other than term insurance
policies and pure endowment policies, delivered or issued for delivery in this
State shall contain provisions which are not less favorable to the policyholder
than the following:
(a) A provision for policy
loans after the policy has been in force for three (3) full years which
provides the following:
1. At least
seventy-five percent (75%) of the policy's cash surrender value may be
borrowed.
2. The amount borrowed
shall bear interest at a rate not to exceed that permitted by Section
33-25-3.1 of the Georgia Insurance
Code.
3. Any indebtedness shall be
deducted from the proceeds payable on death.
4. Any indebtedness shall be deducted from
the cash surrender value upon surrender or in determining any nonforfeiture
benefit.
5. For scheduled premium
policies, whenever the indebtedness exceeds the cash surrender value, the
insurer shall give notice of any intent to cancel the policy if the excess
indebtedness is not repaid within thirty-one (31) days after the date of
mailing of such notice. For flexible premium policies, whenever the total
charges authorized by the policy that are necessary to keep the policy in force
until the next following processing day exceed the amounts available under the
policy to pay such charges, a report must be sent to the policyholder
containing the information specified in Section (3) of Rule
120-2-32-.10.
6. The policy may provide that if, at any
time, so long as premiums are duly paid, the variable death benefit is less
than it would have been if no loan or withdrawal had ever been made, the
policyholder may increase such variable death benefit up to what it would have
been if there had been no loan or withdrawal by paying an amount not exceeding
one hundred ten percent (110%) of the corresponding increase in cash value and
by furnishing such evidence of insurability as the insurer may
request.
7. The policy may specify
a reasonable minimum amount which may be borrowed at any time but such minimum
shall not apply to any automatic premium loan provision.
8. No policy loan provision is required if
the policy is under the extended insurance nonforfeiture option.
9. The policy loan provisions shall be
constructed so that variable life insurance policyholders who have not
exercised such provisions are not disadvantaged by the exercise
thereof.
10. Amounts paid to the
policyholders upon the exercise of any policy loan provision shall be withdrawn
from the separate account and shall be returned to the separate account upon
repayment except that a stock insurer may provide the amounts for policy loan
from the general account.
(5) Other Policy Provisions. The following
provision may in substance be included in a variable life insurance policy or
related form delivered or issued for delivery in this State;
(a) an exclusion for suicide within two (2)
years of the issue date of the policy; provided, however, that to the extent of
the increased death benefits only, the policy may provide an exclusion for
suicide within two years of any increase in death benefits which results from
an application of the owner subsequent to the policy issue date;
(b) incidental insurance benefits may be
offered on a fixed or variable basis;
(c) policies issued on a participating basis
shall offer to pay dividend amounts in cash. In addition, such policies may
offer the following dividend options:
1. the
amount of the dividend may be credited against premium payments;
2. the amount of the dividend may be applied
to provide amounts of additional fixed or variable benefit life
insurance;
3. the amount of the
dividend may be deposited in the general account at a specified minimum rate of
interest;
4. the amount of the
dividend may be applied to provide paid-up amounts of fixed benefit one-year
term insurance;
5. the amount of
the dividend may be deposited as a variable deposit in a separate
account.
(d) A provision
allowing the policyholder to elect in writing in the application for the policy
or thereafter an automatic premium loan on a basis not less favorable than that
required of the policy loans under Section (4) of this Rule, except that a
restriction that no more than two consecutive premiums can be paid under this
provision may be imposed;
(e) A
provision allowing the policyholder to make partial withdrawals;
(f) Any other policy provision approved by
the Commissioner.
Note - As in original. There is no (4)(b).