Ill. Admin. Code tit. 50, § 930.40 - Definitions
For the purposes of this Part, the following definitions shall apply:
a) Buyer's Guide. A Buyer's
Guide is a document that contains the language contained in Exhibit A or the
National Association of Insurance Commissioner's (NAIC) Life Insurance Buyer's
Guide contained in Exhibit B, as prescribed by Section
930.80
of this Part.
b) Cash Dividend. A
Cash Dividend is the current illustrated dividend that can be applied toward
payment of the gross premium.
c)
Equivalent Level Annual Dividend. The Equivalent Level Annual Dividend is
calculated by applying the following steps:
1)
Accumulate the annual cash dividends at five percent interest compounded
annually to the end of the tenth and twentieth policy years.
2) Divide each accumulation of subsection
(c)(1) 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 subsection (c)(1) over the respective periods stipulated in subsection
(c)(1). If the period is ten years, the factor is 13.207 and if the period is
twenty years, the factor is 34.719.
3) Divide the results of subsection (c)(2) by
the number of thousands of the Equivalent Level Death Benefit to arrive at the
Equivalent Level Annual Dividend.
d) Equivalent Level Death Benefit. The
Equivalent Level Death Benefit of a policy or term life insurance rider is an
amount calculated as follows:
1) 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 per cent
interest compounded annually to the end of the tenth and twentieth policy years
respectively.
2) Divide each
accumulation of subsection (d)(1) 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 subsection (d)(1) over the respective periods
stipulated in subsection (d)(1). If the period is ten years, the factor is
13.207 and if the period is twenty years, the factor is 34.719.
e) Generic Name. Generic Name
means a short title that is descriptive of the premium and benefit patterns of
a policy or a rider.
f) Guaranteed
elements means the premiums, benefits, values, credits or charges under a
policy of life insurance that are guaranteed and determined at issue.
g) Life Insurance Cost Indexes.
1) Life Insurance Surrender Cost Index. The
Life Insurance Surrender Cost Index is calculated by applying the following
steps:
A) Determine the guaranteed cash
surrender value, if any.
B) 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 subsection (g)(1)(A).
C) Divide the result of subsection (g)(1)(B)
(subsection (g)(1)(A) 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 subsection (g)(1)(B)
(subsection (g)(1)(A) for guaranteed cost policies) over the respective periods
stipulated in subsection (g)(1)(A). If the period is ten years, the factor is
13.207 and if the period is twenty years, the factor is 34.719.
D) 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
subsection (g)(1)(A) and dividing the result by the respective factors stated
in subsection (g)(1)(C) (this amount is the annual premium payable for a level
premium plan).
E) Subtract the
result of subsection (g)(1)(C) from subsection (g)(1)(D).
F) Divide the result of subsection (g)(1)(E)
by the number of thousands of the Equivalent Level Death Benefit to arrive at
the Life Insurance Surrender Cost Index.
2) Life Insurance Net Payment Cost Index. The
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.
h) Non-guaranteed elements means the
premiums, benefits, values, credits or charges under a policy of life insurance
that are not guaranteed or not determined at issue.
i) Policy Summary.
1) For the purposes of this Part, Policy
Summary means a written statement describing the elements of the policy
including but not limited to:
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 60
through 65 or maturity, whichever is earlier:
i) The annual premium for the basic
policy.
ii) The annual premium for
each optional rider.
iii)
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, that is provided by the basic policy and each optional
rider, with benefits provided under the basic policy and each rider shown
separately.
iv) Total guaranteed
cash surrender values at the end of the year with, values shown separately for
the basic policy and each rider.
v)
Cash dividends payable at the end of the year, with values shown separately for
the basic policy and each rider. (Dividends need not be displayed beyond the
twentieth policy year.)
vi)
Guaranteed endowment amounts payable under the policy that are not included
under guaranteed cash surrender values (see subsection
(i)(1)(e)(iv)).
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. Indexes need not be included for optional riders that are limited to
benefits such as accidental death benefits, disability waiver of premium,
preliminary term life insurance coverage of less than 12 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 that
includes dividends shall also include a statement that dividends are based on
the company's current dividend scale and are not guaranteed. When using Exhibit
A, the Policy Summary must be accompanied by 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) When using
Exhibit A, a statement in close proximity to the Life Insurance Cost 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.
2) 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 that 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 subsection (i)(1)(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.
j) Preneed Funeral Contract or
Prearrangement. An agreement by or for an individual before that individual's
death relating to the purchase or provision of specific funeral or cemetery
merchandise or services.
Notes
Amended at 33 Ill. Reg. 2262, effective January 26, 2009
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