CHAPTER 1105. STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE - Texas Statutes

INSURANCE CODE

TITLE 7. LIFE INSURANCE AND ANNUITIES

SUBTITLE A. LIFE INSURANCE IN GENERAL

CHAPTER 1105. STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1105.001. SHORT TITLE. This chapter may be cited as the

Standard Nonforfeiture Law for Life Insurance.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.002. APPLICABILITY OF CHAPTER. (a) This chapter

applies to a policy issued by a company on or after January 1,

1974.

(b) This chapter also applies to a policy issued by a company

after a date specified in a written notice:

(1) that was filed by the company with the State Board of

Insurance after August 23, 1963, but before January 1, 1974; and

(2) under which the company filing the notice elected to comply

before January 1, 1974, with the law codified by this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.003. EXEMPTIONS. (a) This chapter does not apply to:

(1) reinsurance;

(2) group insurance;

(3) pure endowment;

(4) an annuity or reversionary annuity contract;

(5) a term policy of uniform amount that:

(A) does not provide guaranteed nonforfeiture or endowment

benefits or renewal of the policy;

(B) has a term of 20 years or less that expires before the

insured reaches 71 years of age; and

(C) has uniform premiums that are payable during the entire term

of the policy;

(6) a term policy of decreasing amount:

(A) that does not provide guaranteed nonforfeiture or endowment

benefits; and

(B) on which each adjusted premium, computed as specified by

Subchapter B or D, is less than the adjusted premium computed in

that manner for a term policy of uniform amount, or a renewal of

a term policy of uniform amount, that:

(i) does not provide guaranteed nonforfeiture or endowment

benefits;

(ii) is issued at the same age and for the same initial amount

of insurance;

(iii) has a term of 20 years or less and expires before the

insured reaches 71 years of age; and

(iv) has uniform premiums that are payable during the entire

term of the policy;

(7) a policy:

(A) that does not provide guaranteed nonforfeiture or endowment

benefits; and

(B) for which no cash surrender value, if any, or present value

of any paid-up nonforfeiture benefit, at the beginning of any

policy year, computed as specified by Section 1105.007, 1105.008,

1105.009, Subchapter B, or Subchapter D, exceeds 2-1/2 percent of

the amount of insurance at the beginning of the same policy year;

(8) a policy delivered outside this state through an agent or

other representative of the company that issued the policy; or

(9) a policy that:

(A) does not provide for cash values or nonforfeiture values;

and

(B) meets the requirements of Section 884.403(b).

(b) For purposes of determining the applicability of this

chapter, the age at expiry of a joint term life insurance policy

is the age at expiry of the oldest insured life on that date.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.004. REQUIRED NONFORFEITURE PROVISIONS. (a) A life

insurance policy delivered or issued for delivery in this state

must contain in substance the provisions prescribed by

Subsections (b), (c), and (d) or corresponding provisions that:

(1) in the opinion of the department, are at least as favorable

to the defaulting or surrendering policyholder; and

(2) essentially comply with Section 1105.012.

(b) A life insurance policy must provide that if there is a

default in the payment of a premium the company, on proper

request not later than the 60th day after the due date of the

premium that is in default, will grant a paid-up nonforfeiture

benefit on a plan stipulated in the policy, effective as of that

due date, in the amount specified by this chapter. A company may

substitute for the paid-up nonforfeiture benefit required by this

subsection an actuarially equivalent alternative paid-up

nonforfeiture benefit that provides a greater amount or longer

period of death benefits or, if applicable, a greater amount or

earlier payment of endowment benefits. To elect an alternative

paid-up nonforfeiture benefit under this subsection, the person

entitled to make the election must submit a proper request not

later than the 60th day after the due date of the premium that is

in default.

(c) A life insurance policy must:

(1) provide that on surrender of the policy not later than the

60th day after the due date of a premium payment that is in

default the company will pay, in lieu of a paid-up nonforfeiture

benefit, a cash surrender value in the amount specified by this

chapter if the premiums have been paid for at least:

(A) three full years for a policy of ordinary insurance; or

(B) five full years for a policy of industrial insurance;

(2) provide that a specified paid-up nonforfeiture benefit is

effective as specified by the policy unless the person entitled

to make the election elects another available option not later

than the 60th day after the due date of a premium payment that is

in default; and

(3) provide that on surrender of the policy not later than the

30th day after any policy anniversary the company will pay a cash

surrender value in the amount specified by this chapter if:

(A) the policy has become paid up by completion of all premium

payments; or

(B) the policy is continued under a paid-up nonforfeiture

benefit that became effective on or after:

(i) the third policy anniversary for a policy of ordinary

insurance; or

(ii) the fifth policy anniversary for a policy of industrial

insurance.

(d) A life insurance policy must contain:

(1) subject to Subsection (e), a statement of:

(A) the mortality table, interest rate, and method used to

compute the cash surrender values and the paid-up nonforfeiture

benefits available under the policy, if the policy:

(i) causes, on a basis guaranteed by the policy, unscheduled

changes in benefits or premiums; or

(ii) provides an option for changes in benefits or premiums

other than a change to a new policy; or

(B) the mortality table and interest rate used to compute the

cash surrender values and the paid-up nonforfeiture benefits

available under the policy, with a table showing the cash

surrender value, if any, and paid-up nonforfeiture benefit, if

any, available under the policy on each policy anniversary during

the first 20 policy years or the term of the policy, whichever is

shorter, if the policy is a policy other than one described by

Paragraph (A)(i) or (ii);

(2) a statement that the cash surrender values and the paid-up

nonforfeiture benefits available under the policy are not less

than the minimum values and benefits required by the insurance

laws of this state;

(3) an explanation of the manner in which the cash surrender

values and the paid-up nonforfeiture benefits are altered by the

existence of any paid-up additions credited to the policy or any

indebtedness to the company on the policy and, if a detailed

statement of the method used to compute the values and benefits

shown in the policy is not stated in the policy, a statement that

the method of computation has been filed with the department; and

(4) a statement of the method to be used to compute the cash

surrender value and paid-up nonforfeiture benefit available under

the policy on any policy anniversary after the last anniversary

for which those values and benefits are consecutively shown in

the policy.

(e) The values and benefits described by Subsection (d)(1)(B)

must be computed on the assumption that:

(1) there are no dividends or paid-up additions credited to the

policy; and

(2) there is no indebtedness to the company on the policy.

(f) A provision prescribed by Subsection (b), (c), or (d) or a

portion of a provision that does not apply because of the plan of

insurance may, to the extent inapplicable, be omitted from the

policy.

(g) A company shall reserve the right to defer payment of any

cash surrender value for a period of six months after demand for

payment of the cash surrender value and surrender of the policy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.005. COMPUTATION OF ADJUSTED PREMIUMS AND PRESENT

VALUES; MORTALITY TABLES AND INTEREST RATES. (a) Except as

provided by Subsection (b) or (e) or Section 1105.055, 1105.152,

or 1105.153, an adjusted premium or present value determined

under this chapter must be computed on the basis of:

(1) the Commissioners 1941 Standard Ordinary Mortality Table for

a policy of ordinary insurance; and

(2) the Commissioners 1941 Standard Industrial Mortality Table

for a policy of industrial insurance.

(b) For a category of ordinary insurance issued to insure a

female risk, an adjusted premium or present value may be computed

according to an age not more than three years younger than the

actual age of the insured.

(c) All computations must be made using the rate of interest,

not to exceed 3-1/2 percent a year, specified by the policy for

computing cash surrender values and paid-up nonforfeiture

benefits.

(d) In the computation of the present value of any paid-up term

insurance with accompanying pure endowment, if any, offered as a

nonforfeiture benefit, the rates of mortality assumed may be not

more than 130 percent of the rates shown in the applicable

mortality table.

(e) Subject to approval by the department, a company may specify

a mortality table other than the applicable table required by

this section for use in computing an adjusted premium or present

value for insurance issued on a substandard basis.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.006. DETERMINATION OF RATED AGE. For purposes of this

chapter, the date a policy is issued is the date as of which the

rated age of the insured is determined.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.007. COMPUTATION OF CASH SURRENDER VALUE FOLLOWING

DEFAULT. (a) Any cash surrender value available under a policy

on a default in payment of a premium due on a policy anniversary,

regardless of whether required by Section 1105.004, must be an

amount not less than the amount, if any, by which the present

value, on the policy anniversary, of the future guaranteed

benefits that would have been available under the policy,

including any existing paid-up additions, had there not been a

default exceeds the sum of:

(1) the then present value of the adjusted premiums as

determined under Subchapter B or D that correspond to premiums

that would have become due on and after the policy anniversary;

and

(2) the amount of any indebtedness to the company on the policy.

(b) Subsection (a) does not require a cash surrender value

greater than the reserve for the policy computed as provided by

Subchapter B, Chapter 425.

(c) For a policy to which Subchapter B applies and that by rider

or supplemental policy provision provides supplemental life

insurance or annuity benefits at the option of the insured and

for an identifiable additional premium, the cash surrender value

computed under Subsection (a) must be an amount not less than the

sum of:

(1) the cash surrender value as computed under Subsection (a)

for an otherwise similar policy issued at the same age without

the rider or supplemental policy provision; and

(2) the cash surrender value as computed under Subsection (a)

for a policy that provides only the benefits provided by the

rider or supplemental policy provision.

(d) For a family policy to which Subchapter B applies and that

defines a primary insured and provides term insurance on the life

of the spouse of the primary insured that expires before the

spouse reaches 71 years of age, the cash surrender value as

computed under Subsection (a) must be an amount not less than the

sum of:

(1) the cash surrender value as computed under Subsection (a)

for an otherwise similar policy issued at the same age that does

not provide the term insurance on the life of the spouse; and

(2) the cash surrender value as computed under Subsection (a)

for a policy that provides only the benefits provided by the term

insurance on the life of the spouse.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2F.004, eff. April 1, 2009.

Sec. 1105.008. COMPUTATION OF CASH SURRENDER VALUE ON SURRENDER

FOLLOWING POLICY ANNIVERSARY. Any cash surrender value available

not later than the 30th day after the date of a policy

anniversary under a policy paid up by completion of all premium

payments or a policy continued under any paid-up nonforfeiture

benefit, regardless of whether required by Section 1105.004, must

be an amount not less than the present value, on the policy

anniversary, of the future guaranteed benefits available under

the policy, including any existing paid-up additions, less any

indebtedness to the company on the policy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.009. COMPUTATION OF PAID-UP NONFORFEITURE BENEFITS.

Any paid-up nonforfeiture benefit available under the policy on

default in the payment of a premium due on a policy anniversary

must be such that its present value as of the policy anniversary

is at least equal to:

(1) the cash surrender value then available under the policy; or

(2) if a cash surrender value is not available under the policy,

the cash surrender value that would have been required by this

chapter in the absence of the condition that premiums must have

been paid for at least a specified period.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.010. PRORATION OF VALUES; NET VALUE OF PAID-UP

ADDITIONS. (a) Any cash surrender value and any paid-up

nonforfeiture benefit available under a policy on default in the

payment of a premium due at any time other than on the policy

anniversary must be computed with allowance for the lapse of time

and the payment of fractional premiums after the preceding policy

anniversary, except that a cash surrender value or nonforfeiture

benefit is not required unless the cash surrender value or

nonforfeiture benefit was required on the preceding policy

anniversary.

(b) A value determined under Sections 1105.005-1105.009,

Subchapter B, or Subchapter D may be computed on the assumption

that any death benefit is payable at the end of the policy year

of death.

(c) The net value of any paid-up additions, other than paid-up

term additions, may not be less than the amounts used to provide

those additions.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.011. INCLUSION OF CERTAIN ADDITIONAL BENEFITS IN

COMPUTING NONFORFEITURE BENEFITS NOT REQUIRED. (a)

Notwithstanding Section 1105.007 or 1105.008, additional benefits

described by Subsection (b), and premiums for those benefits, may

not be included in computing a cash surrender value or

nonforfeiture benefits required by this chapter. Additional

benefits described by Subsection (b) are not required to be

included in any paid-up nonforfeiture benefits.

(b) This section applies to additional benefits payable:

(1) in the event of death or dismemberment by accident;

(2) in the event of total and permanent disability;

(3) as reversionary annuity or deferred reversionary annuity

benefits;

(4) as term insurance benefits provided by a rider or

supplemental policy provision to which, if issued as a separate

policy, this chapter would not apply;

(5) as term insurance on the life of a child that:

(A) is provided in a policy on the life of a parent of the

child;

(B) expires before the child reaches 26 years of age;

(C) is uniform in amount after the child reaches one year of

age; and

(D) has not become paid up by reason of the death of a parent of

the child; or

(6) as other policy benefits additional to life insurance and

endowment benefits.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.012. PROGRESSION OF CASH SURRENDER VALUES. (a) This

section applies only to a policy issued on or after January 1,

1985.

(b) Any cash surrender value available under a policy to which

this section applies on default in the payment of a premium due

on any policy anniversary must be in an amount that does not

differ by more than two-tenths of one percent of the amount of

insurance, if the insurance is uniform in amount, or the average

amount of insurance at the beginning of each of the first 10

policy years, from the sum of:

(1) the greater of:

(A) zero; or

(B) the basic cash value as determined under Subsection (c); and

(2) the present value of any existing paid-up additions minus

the amount of any indebtedness to the company under the policy.

(c) The basic cash value must be equal to the present value, on

the applicable policy anniversary, of the future guaranteed

benefits that would have been available under the policy,

excluding any existing paid-up additions and before deduction of

any indebtedness to the company, had there not been a default,

less the then present value of the nonforfeiture factors

specified by Subsection (d) corresponding to premiums that would

have become due on and after that anniversary. The effects on the

basic cash value of supplemental life insurance or annuity

benefits or of family coverage, as described by Section 1105.007

or 1105.151, as applicable, must be the same as the effects

specified by Section 1105.007 or 1105.151, as applicable, on the

cash surrender values determined under the applicable section.

(d) The nonforfeiture factor for each policy year must be an

amount equal to a percentage of the adjusted premium for the

policy year, as computed under Section 1105.052 or 1105.151, as

applicable. That percentage must:

(1) be the same percentage for each policy year between the

second policy anniversary and the later of:

(A) the fifth policy anniversary; or

(B) the first policy anniversary at which there is available

under the policy a cash surrender value in an amount, before

including any paid-up additions and before deducting any

indebtedness, of at least two-tenths of one percent of:

(i) the amount of insurance, if the insurance is uniform in

amount; or

(ii) the average amount of insurance at the beginning of each of

the first 10 policy years; and

(2) be such that each percentage after the later of the policy

anniversaries specified by Subdivision (1) applies to at least

five consecutive policy years.

(e) Notwithstanding Subsection (d), the basic cash value may not

be less than the value that would be obtained if the adjusted

premiums for the policy, as computed under Section 1105.052 or

1105.151, as applicable, were substituted for the nonforfeiture

factors in the computation of the basic cash value.

(f) In this section:

(1) an adjusted premium or present value for a particular policy

must be computed on the same mortality and interest bases as

those used to demonstrate that the policy complies with the other

sections of this chapter; and

(2) the cash surrender values must include any endowment

benefits available under the policy.

(g) The amount of any cash surrender value available other than

on default in payment of a premium due on a policy anniversary,

and the amount of any paid-up nonforfeiture benefits available

under the policy on default in the payment of a premium, must be

determined in a manner consistent with the manner specified by

Section 1105.004, 1105.007, 1105.008, 1105.009, 1105.010,

1105.011, or Subchapter B to determine the analogous minimum

amount. The amounts of any cash surrender value or paid-up

nonforfeiture benefits granted in connection with additional

benefits, such as those listed in Section 1105.011(b), must

comply with the principles of this section.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

SUBCHAPTER B. COMPUTATION OF ADJUSTED PREMIUMS USING

NONFORFEITURE NET LEVEL PREMIUM METHOD

Sec. 1105.051. APPLICABILITY OF SUBCHAPTER. (a) This

subchapter applies to a policy issued on or after January 1,

1989.

(b) This subchapter also applies to a policy issued by a company

after the date specified in a written notice:

(1) that was filed with the State Board of Insurance after

August 31, 1981, but before January 1, 1989; and

(2) under which the company filing the notice elected to comply

before January 1, 1989, with the law codified by this subchapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.052. COMPUTATION OF ADJUSTED PREMIUMS USING

NONFORFEITURE NET LEVEL PREMIUM METHOD. (a) Except as provided

by Section 1105.054 and subject to Subsection (b), the adjusted

premiums for a policy to which this section applies must be

computed on an annual basis and must be a uniform percentage of

the respective premiums specified by the policy for each policy

year so that the present value, at the date of issue of the

policy, of all adjusted premiums is equal to the sum of:

(1) the then present value of the future guaranteed benefits

available under the policy;

(2) one percent of:

(A) the amount of insurance, if the insurance is uniform in

amount; or

(B) the average amount of insurance at the beginning of each of

the first 10 policy years; and

(3) 125 percent of the nonforfeiture net level premium as

determined under Subsection (d).

(b) The amount of premiums specified by the policy and used in

computing adjusted premiums under Subsection (a) does not

include:

(1) an amount payable as an extra premium to cover an impairment

or special hazard; or

(2) any uniform annual contract charge or policy fee specified

by the policy in a statement of the method to be used to compute

the cash surrender values and paid-up nonforfeiture benefits.

(c) In applying the percentage specified by Subsection (a)(3), a

nonforfeiture net level premium may not be considered to exceed

four percent of:

(1) the amount of insurance, if the insurance is uniform in

amount; or

(2) the average amount of insurance at the beginning of each of

the first 10 policy years.

(d) The nonforfeiture net level premium must be equal to the

present value, at the date of issue of the policy, of the

guaranteed benefits available under the policy divided by the

present value, on the date of issue of the policy, of an annuity

of one per year payable on the date of issue of the policy and on

each anniversary of the policy on which a premium becomes due.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.053. COMPUTATION OF AMOUNTS FOR POLICY WITH CHANGING

BENEFITS OR PREMIUMS. (a) This section applies only to a policy

that:

(1) causes, on a basis guaranteed by the policy, unscheduled

changes in benefits or premiums; or

(2) provides an option for changes in benefits or premiums other

than a change to a new policy.

(b) The adjusted premiums and present values as to a policy to

which this section applies must initially be computed on the

assumption that future benefits and premiums will not change from

those specified on the date the policy is issued. At the time of

a change in the benefits or premiums, the future adjusted

premiums, nonforfeiture net level premiums, and present values

must be recomputed on the assumption that future benefits and

premiums will not change from those specified by the policy

immediately after the change.

(c) Except as provided by Section 1105.054, the recomputed

future adjusted premiums as to a policy to which this section

applies must be a uniform percentage of the respective future

premiums specified by the policy for each policy year, so that

the present value, at the time of change to the newly defined

benefits or premiums, of all future adjusted premiums is equal to

the amount by which the sum of the then present value of the then

future guaranteed benefits available under the policy and the

additional expense allowance, as computed under Subsection (e),

if any, exceeds the then cash surrender value, if any, or present

value of any paid-up nonforfeiture benefit under the policy.

(d) The amount of future premiums specified by the policy and

used in computing adjusted premiums under Subsection (c) does not

include:

(1) an amount payable as an extra premium to cover an impairment

or special hazard; or

(2) any uniform annual contract charge or policy fee specified

by the policy in a statement of the method to be used to compute

the cash surrender values and paid-up nonforfeiture benefits.

(e) The additional expense allowance, at the time of the change

to the newly defined benefits or premiums, is the sum of:

(1) one percent of the amount, if any, by which the average

amount of insurance at the beginning of each of the first 10

policy years after the change exceeds the average amount of

insurance before the change at the beginning of each of the first

10 policy years after the time of the most recent previous change

or, if there has not been a previous change, the date the policy

is issued; and

(2) 125 percent of any increase in the nonforfeiture net level

premium.

(f) The recomputed nonforfeiture net level premium must be equal

to the quotient of:

(1) the sum of:

(A) the nonforfeiture net level premium applicable before the

change multiplied by the present value of an annuity of one per

year payable on each anniversary of the policy on or after the

date of the change on which a premium would have become due had

the change not occurred; and

(B) the present value of the increase in future guaranteed

benefits available under the policy; divided by

(2) the present value of an annuity of one per year payable on

each anniversary of the policy, on or after the date of the

change, on which a premium becomes due.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.054. COMPUTATION OF AMOUNTS FOR POLICY ISSUED ON

SUBSTANDARD BASIS. (a) This section applies only to a policy

issued on a substandard basis that provides reduced graded

amounts of insurance so that, in each policy year, the policy has

the same tabular mortality cost as an otherwise similar policy

issued on the standard basis that provides higher uniform amounts

of insurance. This section applies notwithstanding any provision

of this subchapter to the contrary.

(b) Adjusted premiums and present values as to a policy to which

this section applies may be computed as if the policy were issued

to provide the higher uniform amounts of insurance of an

otherwise similar policy issued on the standard basis.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.055. USE OF MORTALITY TABLES AND INTEREST RATES WITH

NONFORFEITURE NET LEVEL PREMIUM METHOD. (a) Subject to

Subsections (c)-(i), an adjusted premium or present value

computed under this subchapter must be computed:

(1) for a policy of ordinary insurance:

(A) on the basis of the Commissioners 1980 Standard Ordinary

Mortality Table; or

(B) at the option of the company for any one or more specified

plans of life insurance, on the basis of the Commissioners 1980

Standard Ordinary Mortality Table with Ten-Year Select Mortality

Factors; and

(2) for a policy of industrial insurance, on the basis of the

Commissioners 1961 Standard Industrial Mortality Table.

(b) Subject to Subsections (c)-(i), computations on each policy

issued in a particular calendar year must be made using a rate of

interest not to exceed the nonforfeiture interest rate as defined

by Section 1105.056 for a policy issued in that calendar year.

(c) At the option of the company, computations for each policy

issued in a particular calendar year may be made using a rate of

interest not to exceed the nonforfeiture interest rate, as

defined by Section 1105.056, for a policy issued in the preceding

calendar year.

(d) Under any paid-up nonforfeiture benefit, including any

paid-up dividend additions, any cash surrender value available,

regardless of whether required by Section 1105.004, must be

computed on the basis of the mortality table and rate of interest

used to determine the amount of the paid-up nonforfeiture benefit

and any paid-up dividend additions.

(e) A company may compute the amount of any guaranteed paid-up

nonforfeiture benefit, including any paid-up additions under the

policy, on the basis of an interest rate not less than the rate

specified by the policy for computing cash surrender values.

(f) In the computation of the present value of any paid-up term

insurance with accompanying pure endowment, if any, offered as a

nonforfeiture benefit, the rates of mortality assumed may be not

more than the rates shown in:

(1) the Commissioners 1980 Extended Term Insurance Table, for a

policy of ordinary insurance; or

(2) the Commissioners 1961 Industrial Extended Term Insurance

Table, for a policy of industrial insurance.

(g) For a policy issued on a substandard basis, the computation

of any adjusted premium or present value may be based on

appropriate modifications to a table described by Subsection (f).

(h) Any ordinary mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by rules adopted by the commissioner for use in determining the

minimum nonforfeiture standard may be substituted for:

(1) the Commissioners 1980 Standard Ordinary Mortality Table

with or without Ten-Year Select Mortality Factors; or

(2) the Commissioners 1980 Extended Term Insurance Table.

(i) Any industrial mortality table adopted after 1980 by the

National Association of Insurance Commissioners that is approved

by rules adopted by the commissioner for use in determining the

minimum nonforfeiture standard may be substituted for:

(1) the Commissioners 1961 Standard Industrial Mortality Table;

or

(2) the Commissioners 1961 Industrial Extended Term Insurance

Table.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.056. NONFORFEITURE INTEREST RATE. The annual

nonforfeiture interest rate for a policy issued in a particular

calendar year is equal to 125 percent of the calendar year

statutory valuation interest rate for that policy as defined by

Subchapter B, Chapter 425, rounded to the nearest one-fourth of

one percent.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2F.005, eff. April 1, 2009.

Sec. 1105.057. REFILING OF POLICY PROVISIONS NOT REQUIRED.

Notwithstanding any provision of this code to the contrary, as to

a policy to which this subchapter applies, a refiling of

nonforfeiture values or of the method of computing nonforfeiture

values for a previously approved policy form that involves only a

change in the interest rate or mortality table used to compute

nonforfeiture values does not require refiling of any provision

of the policy form.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

SUBCHAPTER C. NONFORFEITURE BENEFITS FOR CERTAIN PLANS

Sec. 1105.101. NONFORFEITURE BENEFITS FOR INDETERMINATE PREMIUM

PLANS AND CERTAIN OTHER PLANS. (a) This section applies to a

plan of life insurance that:

(1) provides for future premium determination, the amounts of

which are to be determined by the insurance company based on then

estimates of future experience; or

(2) is such that minimum values cannot be determined by a method

described by Sections 1105.004-1105.009, Subchapter B, or

Subchapter D.

(b) The department must be satisfied that:

(1) the benefits provided under the plan are substantially as

favorable to policyholders and insureds as the minimum benefits

otherwise required by Sections 1105.004-1105.009, Subchapter B,

or Subchapter D; and

(2) the benefits and the pattern of premiums of the plan are not

such as to mislead prospective policyholders or insured persons.

(c) The cash surrender values and paid-up nonforfeiture benefits

provided by the plan may not be less than the minimum values and

benefits required for the plan computed by a method consistent

with the principles of this subchapter as determined under rules

adopted by the commissioner.

(d) Notwithstanding any other law of this state, any policy,

contract, or certificate providing life insurance under the plan

must be approved by the department before the plan may be

marketed, issued, delivered, or used in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

SUBCHAPTER D. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN

POLICIES

Sec. 1105.151. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN

POLICIES ISSUED BEFORE JANUARY 1, 1989. (a) This section

applies only to a policy issued before January 1, 1989, to which

Subchapter B does not apply.

(b) The adjusted premiums for a policy to which this section

applies must be computed on an annual basis or, at the option of

the company, on a fully continuous basis if that basis is

consistent with actual policy provisions and the use of that

basis is specified by the policy.

(c) Except as provided by Subsection (f), the adjusted premiums

must be a uniform percentage of the respective premiums specified

by the policy for each policy year, excluding amounts stated in

the policy as extra premiums to cover impairments or special

hazards, so that the present value, as of the date the policy is

issued, of all the adjusted premiums is equal to the sum of:

(1) the then present value of the future guaranteed benefits

available under the policy;

(2) two percent of:

(A) the amount of insurance, if the insurance is uniform in

amount; or

(B) the equivalent uniform amount of insurance, as determined

under this section, if the amount of insurance varies with the

duration of the policy;

(3) 40 percent of the adjusted premium for the first policy

year; and

(4) 25 percent of the lesser of:

(A) the adjusted premium for the first policy year; or

(B) the adjusted premium for a whole life policy of the same or

an equivalent uniform amount with uniform premiums for the whole

of life issued at the same age for the same amount of insurance.

(d) In applying the percentages specified by Subsections (c)(3)

and (4), an adjusted premium may not be considered to exceed four

percent of the amount of insurance or equivalent uniform amount.

(e) For purposes of this section, for a policy that provides an

amount of insurance that varies with the duration of the policy:

(1) except as provided by Subdivision (2), the equivalent

uniform amount of insurance is considered to be the uniform

amount of insurance provided by an otherwise similar policy,

containing the same endowment benefit, if any, issued at the same

age and for the same term, the amount of which does not vary with

duration and the benefits under which have the same present value

at the date of issue as the benefits under the policy; and

(2) if the policy is issued on the life of a child younger than

10 years of age, the equivalent uniform amount of insurance may

be computed as though the amount of insurance provided by the

policy before the insured reaches 10 years of age were the amount

provided by the policy at age 10.

(f) The adjusted premiums for a policy that provides term

insurance benefits by rider or a supplemental policy provision

must be equal to the adjusted premiums for an otherwise similar

policy issued at the same age without the term insurance

benefits, increased, during the period for which premiums for the

term insurance benefits are payable, by the adjusted premiums for

the term insurance. The adjusted premiums specified by this

subsection must be computed separately in the manner specified by

Subsections (b)-(e).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.152. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN

ORDINARY POLICIES ISSUED BEFORE JANUARY 1, 1989. (a) Except as

provided by Subsection (b), this section applies only to an

ordinary policy to which Subchapter B does not apply and that is

issued on or after January 1, 1974 and before January 1, 1989.

(b) This section also applies to an ordinary policy issued by a

company after a date specified in a written notice:

(1) that was filed by the company with the State Board of

Insurance after August 23, 1963, but before January 1, 1974; and

(2) under which the company filing the notice elected to comply

before January 1, 1974, with the law codified by this section.

(c) An adjusted premium or present value determined under this

chapter as to a policy to which this section applies must be

computed on the basis of the Commissioners 1958 Standard Ordinary

Mortality Table.

(d) A computation as to a policy to which this section applies

must be made using the rate of interest specified by the policy

for computing cash surrender values and paid-up nonforfeiture

benefits, except that the rate of interest may not exceed:

(1) 3-1/2 percent a year for a policy issued before June 14,

1973;

(2) 4 percent a year for a policy issued on or after June 14,

1973, and before August 29, 1977;

(3) 5-1/2 percent a year for a policy issued on or after August

29, 1977, other than a single premium whole life or endowment

insurance policy; or

(4) 6-1/2 percent a year for a single premium whole life or

endowment insurance policy issued on or after August 29, 1977.

(e) For a category of ordinary insurance issued to insure a

female risk:

(1) an adjusted premium or present value for a policy issued

before August 29, 1977, may be computed according to an age not

more than three years younger than the actual age of the insured;

and

(2) an adjusted premium or present value for a policy issued on

or after August 29, 1977, may be computed according to an age not

more than six years younger than the actual age of the insured.

(f) In the computation of the present value of paid-up term

insurance with accompanying pure endowment, if any, offered as a

nonforfeiture benefit, the rates of mortality assumed may not

exceed the rates shown in the Commissioners 1958 Extended Term

Insurance Table.

(g) Subject to approval by the department, a company may specify

a mortality table other than the table required by this section

for use in computing an adjusted premium or present value for

insurance issued on a substandard basis.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.

Sec. 1105.153. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN

INDUSTRIAL POLICIES ISSUED BEFORE JANUARY 1, 1989. (a) Except

as provided by Subsection (b), this section applies only to an

industrial policy to which Subchapter B does not apply and that

is issued on or after January 1, 1974, and before January 1,

1989.

(b) This section also applies to an industrial policy issued by

a company after a date specified in a written notice:

(1) that was filed by the company with the State Board of

Insurance after August 23, 1963, but before January 1, 1974; and

(2) under which the company filing the notice elected to comply

before January 1, 1974, with the law codified by this section.

(c) An adjusted premium or present value determined under this

chapter as to a policy to which this section applies must be

computed on the basis of the Commissioners 1961 Standard

Industrial Mortality Table.

(d) A computation as to a policy to which this section applies

must be made using the rate of interest specified by the policy

for computing cash surrender values and paid-up nonforfeiture

benefits, except that the rate of interest may not exceed:

(1) 3-1/2 percent a year for a policy issued before June 14,

1973;

(2) 4 percent a year for a policy issued on or after June 14,

1973, and before August 29, 1977;

(3) 5-1/2 percent a year for a policy issued on or after August

29, 1977, other than a single premium whole life or endowment

insurance policy; or

(4) 6-1/2 percent a year for a single premium whole life or

endowment insurance policy issued on or after August 29, 1977.

(e) In the computation of the present value of paid-up term

insurance with accompanying pure endowment, if any, offered as a

nonforfeiture benefit, the rates of mortality assumed may not

exceed the rates shown in the Commissioners 1961 Industrial

Extended Term Insurance Table.

(f) Subject to approval by the department, a company may specify

a mortality table other than the table required by this section

for use in computing an adjusted premium or present value for

insurance issued on a substandard basis.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1,

2003.