§ 27-4.3-8 - Consistency of progression of cash surrender values with increasing policy duration. - Rhode Island Statutes

SECTION 27-4.3-8

   § 27-4.3-8  Consistency of progression ofcash surrender values with increasing policy duration. – (a) This section, in addition to all other applicable sections of this chapter,shall apply to all policies issued on or after January 1, 1994. Any cashsurrender value available under the policy in the event of default in a premiumpayment due on any policy anniversary shall be in an amount which does notdiffer by more than two tenths of one percent (.2%) of either the amount ofinsurance, if the insurance is uniform in amount, or the average amount ofinsurance at the beginning of each of the first ten (10) policy years, from thesum of: (1) the greater of zero (0) and the basic cash value specified insubsection (b), and (2) the present value of any existing paid up additionsless the amount of any indebtedness to the insurance company under the policy.

   (b) The basic cash value shall be equal to the present value,on the anniversary, of the future guaranteed benefits which would have beenprovided for by the policy, excluding any existing paid-up additions and beforededuction of any indebtedness to the insurance company, if there had been nodefault, less the then present value of the nonforfeiture factors, as definedin this section, corresponding to premiums which would have fallen due on andafter the anniversary; provided, that the effects on the basic cash value ofsupplemental life insurance or annuity benefits or of family coverage, asdescribed in § 27-4.3-3 or 27-4.3-5, whichever is applicable, shall be thesame as are the effects specified in § 27-4.3-3 or 27-4.3-5, whichever isapplicable, on the cash surrender values defined in that section.

   (c) The nonforfeiture factor for each policy year shall be anamount equal to a percentage of the adjusted premium for the policy year, asdefined in § 27-4.3-5. Except as is required in this section, thepercentage:

   (1) Must be the same percentage for each policy year betweenthe second policy anniversary and the later of: (i) the fifth policyanniversary, and (ii) the first policy anniversary at which there is availableunder the policy a cash surrender value in an amount, before including anypaid-up additions and before deducting any indebtedness, of at least two tenthsof one percent (.2%) of either the amount of insurance, if the insurance isuniform in amount, or the average amount of insurance at the beginning of eachof the first ten (10) policy years; and

   (2) Must be such that no percentage after the later of thetwo policy anniversaries specified in subdivision (c)(1) may apply to fewerthan five (5) consecutive policy years.

   (d) No basic cash value may be less than the value whichwould be obtained if the adjusted premiums for the policy, as defined in §27-4.3-5, were substituted for the nonforfeiture factors in the calculation ofthe basic cash value.

   (e) All adjusted premiums and present values referred to inthis section shall for a particular policy be calculated on the same mortalityand interest bases as are used in demonstrating the policy's compliance withthe other sections of this chapter. The cash surrender values referred to inthis section shall include any endowment benefits provided for by the policy.

   (f) Any cash surrender value available other than in theevent of default in a premium payment due on a policy anniversary, and theamount of any paid up nonforfeiture benefit available under the policy in theevent of default in a premium payment, shall be determined in mannersconsistent with the manners specified for determining the analogous minimumamounts in §§ 27-4.3-2 – 27-4.3-5 and 27-4.3-7. The amounts ofany cash surrender values and of any paid up nonforfeiture benefits granted inconnection with additional benefits such as those listed subdivisions (1)– (6) of § 27-4.3-7 shall conform with the principles of this section.