US Laws, Codes, Statutes & Cases

                                  TITLE  41
                                  INSURANCE
                                  CHAPTER 19
                           LIFE INSURANCE POLICIES
                            AND ANNUITY CONTRACTS
    41-1927.  STANDARD NONFORFEITURE LAW -- LIFE INSURANCE. (1) This section
shall be known as the standard nonforfeiture law for life insurance.
    (2)  Nonforfeiture provisions: In the case of policies issued on or after
the operative date of this section as defined in subsection (14) of this
section, no policy of life insurance, except as set forth in subsection (13)
of this section, shall be delivered or issued for delivery in this state
unless it shall contain in substance the following provisions, or
corresponding provisions which in the opinion of the director are at least as
favorable to the defaulting or surrendering policyholder as are the minimum
requirements hereinafter specified and are essentially in compliance with
subsection (12) of this law:
    (a)  That in the event of default in any premium payment, the insurer will
    grant, upon proper request not later than sixty (60) days after the due
    date of the premium in default, a paid-up nonforfeiture benefit on a plan
    stipulated in the policy, effective as of such due date, of such amount as
    may be hereinafter specified. In lieu of such stipulated paid-up
    nonforfeiture benefit, the insurer may substitute, upon proper request not
    later than sixty (60) days after the due date of the premium in default,
    an actuarially equivalent alternative paid-up nonforfeiture benefit which
    provides a greater amount or longer period of death benefits or, if
    applicable, a greater amount or earlier payment of endowment benefits.
    (b)  That upon surrender of the policy within sixty (60) days after the
    due date of any premium payment in default after premiums have been paid
    for at least three (3) full years in the case of ordinary insurance, and
    five (5) full years in the case of industrial insurance, the insurer will
    pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value
    of such amount as may be hereinafter specified.
    (c)  That a specified paid-up nonforfeiture benefit shall become effective
    as specified in the policy unless the person entitled to make such
    election elects another available option not later than sixty (60) days
    after the due date of the premium in default.
    (d)  That if the policy shall have become paid up by completion of all
    premium payments, or if it is continued under any paid-up nonforfeiture
    benefit which became effective on or after the third policy anniversary in
    the case of ordinary insurance, or the fifth policy anniversary in the
    case of industrial insurance, the insurer will pay, upon surrender of the
    policy within thirty (30) days after any policy anniversary, a cash
    surrender value of such amount as may be hereinafter specified.
    (e)  In the case of policies which cause, on a basis guaranteed in the
    policy, unscheduled changes in benefits or premiums, or which provide an
    option for changes in benefits or premiums other than a change to a new
    policy, a statement of the mortality table, interest rate, and method used
    in calculating cash surrender values and the paid-up nonforfeiture
    benefits available under the policy. In the case of all other policies, a
    statement of the mortality table and interest rate used in calculating the
    cash surrender values and the paid-up nonforfeiture benefits available
    under the policy, together 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, either during the first twenty (20)
    policy years or during the term of the policy, whichever is shorter, such
    values and benefits to be calculated upon the assumption that there are no
    dividends or paid-up additions credited to the policy and that there is no
    indebtedness to the insurer on the policy.
    (f)  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 or pursuant to the insurance law
    of this state; 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
    insurer on the policy; if a detailed statement of the method of
    computation of the values and benefits shown in the policy is not stated
    therein, a statement that such method of computation has been filed with
    the insurance supervisory official of the state in which the policy is
    delivered; and a statement of the method to be used in calculating the
    cash surrender value and paid-up nonforfeiture benefit available under the
    policy on any policy anniversary beyond the last anniversary for which
    such values and benefits are consecutively shown in the policy.
    (3)  Any of the provisions or portions thereof set forth in subdivisions
(a) through (f) of the foregoing subsection (2) which are not applicable by
reason of the plan of insurance may, to the extent inapplicable, be omitted
from the policy. The insurer shall reserve the right to defer the payment of
any cash surrender value for a period of six (6) months after demand therefor
with surrender of the policy. If the insurer defers payment of a cash
surrender value under the provisions of this section, the insurer shall pay
interest to the policyholder at the rate specified in section 28-22-104(2),
Idaho Code, as established and in existence at the time of the surrender
demand.
    (4)  Cash surrender value: Any cash surrender value available under the
policy in the event of default in the premium payment due on any policy
anniversary, whether or not required by subsection (2) of this section, shall
be an amount not less than the excess, if any, of the present value on such
anniversary of the future guaranteed benefits which would have been provided
for by the policy, including any existing paid-up additions if there had been
no default, over the sum of:
    (a)  The then present value of the adjusted premiums as defined in
    subsections (6) through (9) of this section, corresponding to premiums
    which would have fallen due on and after such anniversary, and
    (b)  The amount of any indebtedness to the insurer on account of or
    secured by the policy. Provided, however, that for any policy issued on or
    after the operative date of subsection (9)(d) as defined therein, which
    provides supplemental life insurance or annuity benefits at the option of
    the insured and for an identifiable additional premium by rider or
    supplemental policy provision, the cash surrender value referred to in the
    first paragraph of this subsection shall be an amount not less than the
    sum of the cash surrender value as defined in such paragraph for an
    otherwise similar policy issued at the same age without such rider or
    supplemental policy provision and the cash surrender value as defined in
    such paragraph for a policy which provides only the benefits otherwise
    provided by such rider or supplemental policy provision. Provided,
    further, that for any family policy issued on or after the operative date
    of subsection (9)(d) as defined therein, which defines a primary insured
    and provides term insurance on the life of the spouse of the primary
    insured expiring before the spouse's age seventy-one (71), the cash
    surrender value referred to in the first paragraph of this subsection
    shall be an amount not less than the sum of the cash surrender value as
    defined in such paragraph for an otherwise similar policy issued at the
    same age without such term insurance on the life of the spouse and the
    cash surrender value as defined in such paragraph for a policy which
    provides only the benefits otherwise provided by such term insurance on
    the life of the spouse.
         Any cash surrender value available within thirty (30) days after any
    policy anniversary under any policy paid up by completion of all premium
    payments, or any policy continued under any paid-up nonforfeiture
    benefits, whether or not required by such subsection (2), shall be an
    amount not less than the present value, on such anniversary, of the future
    guaranteed benefits provided for by the policy, including any existing
    paid-up additions, decreased by any indebtedness to the insurer on account
    of or secured by the policy.
    (5)  Paid-up nonforfeiture benefits: Any paid-up nonforfeiture benefit
available under the policy in the event of default in the premium payment due
on any policy anniversary shall be such that its present value as of such
anniversary shall be at least equal to the cash surrender value then provided
for by the policy, or, if none is provided for, that cash surrender value
which would have been required by this section in the absence of the
conditions that premiums shall have been paid for at least a specified period.
    (6)  The adjusted premium: This subsection (6) shall not apply to policies
issued on or after the operative date of subsection (9)(d) as defined therein.
Except as provided in subsection (8) of this section, the adjusted premiums
for any policy shall be calculated on an annual basis and shall be such
uniform percentage of the respective premiums specified in the policy for each
policy year, excluding extra premiums on a substandard policy, that the
present value, at the date of issue of the policy, of all such adjusted
premiums shall be equal to the sum of:
    (a)  The then present value of the future guaranteed benefits provided for
    by the policy;
    (b)  Two per cent (2%) of the amount of the insurance if the insurance be
    uniform in amount, or of the equivalent uniform amount, as hereinafter
    defined, if the amount of insurance varies with the duration of the
    policy;
    (c)  Forty per cent (40%) of the adjusted premium for the first policy
    year;
    (d)  Twenty-five per cent (25%) of either the adjusted premium for the
    first policy year or the adjusted premium for a whole life policy of the
    same uniform or equivalent uniform amount with uniform premiums for the
    whole of life issued at the same age for the same amount of insurance,
    whichever is less, provided, however, that in applying the percentages
    specified in subdivisions (c) and (d) above, no adjusted premiums shall be
    deemed to exceed four per cent (4%) of the amount of insurance or uniform
    amount equivalent thereto. Whenever the plan or term of a policy has been
    changed, either by request of the insured or automatically in accordance
    with the provisions of the policy, the date of issue of the changed policy
    for the purposes of determining a nonforfeiture benefit or cash surrender
    value shall be the date as of which the age of the insured is determined
    for the purposes of the changed policy. The date of issue of a policy for
    the purposes of this subsection shall be the date as of which the rated
    age of the insured is determined.
    (7)  In the case of a policy providing an amount of insurance varying with
the duration of the policy, the equivalent uniform amount thereof for the
purpose of the preceding subsection (6) shall be deemed to be the uniform
amount of insurance provided by an otherwise similar policy, containing the
same endowment benefit or benefits, 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, provided, however, that in the case of a policy for a
varying amount of insurance issued on the life of a child under age ten (10),
the equivalent uniform amount may be computed as though the amount of
insurance provided by the policy prior to the attainment of age ten (10) were
the amount provided by such policy at age ten (10).
    (8)  The adjusted premiums for any policy providing term insurance
benefits by any rider or supplemental policy provision shall be equal to (a)
the adjusted premiums for an otherwise similar policy issued at the same age
without such term insurance benefits, increased, during the period for which
premiums for such term insurance benefits are payable, by (b) the adjusted
premiums for such term insurance, the foregoing items (a) and (b) being
calculated separately and as specified in subsections (6) and (7) except that,
for the purposes of subdivisions (b), (c) and (d) of subsection (6), the
amount of insurance or equivalent uniform amount of insurance used in the
calculation of the adjusted premiums referred to in (b) shall be equal to the
excess of the corresponding amount determined for the entire policy over the
amount used in the calculation of the adjusted premiums in (4)(a).
    (9)(a)  Except as provided in subdivisions (b), (c) and (d) of this
    subsection, all adjusted premiums and present values referred to in this
    section shall for all policies of ordinary insurance be calculated on the
    basis of the commissioners 1941 standard ordinary mortality table,
    provided that for any category of ordinary insurance issued on female
    risks, adjusted premiums and present values may be calculated, at the
    option of the insurer according to an age not more than three (3) years
    younger than the actual age of the insured and such calculations for all
    policies of industrial insurance shall be made on the basis of the 1941
    standard industrial mortality table. All calculations shall be made on the
    basis of the rate of interest, not exceeding three and one-half per cent
    (3 1/2%) per annum, specified in the policy for calculating cash surrender
    values and paid-up nonforfeiture benefits, provided, however, that in
    calculating 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 one hundred thirty per
    cent (130%) of the rates of mortality according to such applicable table,
    provided further that for insurance issued on a substandard basis, the
    calculation of any such adjusted premiums and present values may be based
    on such other table of mortality as may be specified by the insurer and
    approved by the director.
    (b)  This subsection (9)(b) shall not apply to ordinary policies issued on
    or after the operative date of subsection (9)(d) as defined therein. In
    the case of ordinary policies issued on or after the operative date of
    this subdivision as defined herein, all adjusted premiums and present
    values referred to in this section shall be calculated on the basis of the
    commissioners' 1958 standard ordinary mortality table and the rate of
    interest specified in the policy for calculating cash surrender values and
    paid-up nonforfeiture benefits, provided that such rate of interest shall
    not exceed three and one-half per cent (3 1/2%) per annum except that a
    rate of interest not exceeding four per cent (4%) per annum may be used
    for policies issued on or after July 1, 1973, and prior to July 1, 1977,
    and a rate of interest not exceeding five and one-half per cent (5 1/2%)
    per annum may be used for policies issued on or after July 1, 1977, except
    that for any single premium whole life or endowment insurance policy at a
    rate of interest not exceeding six and one-half per cent (6 1/2%) per
    annum may be used and provided that for any category of ordinary insurance
    issued on female risks, adjusted premiums and present values may be
    calculated according to an age not more than six (6) years younger than
    the actual age of the insured. Provided, however, that in calculating 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 those shown in the commissioners'
    1958 extended term insurance table. Provided, further, that for insurance
    issued on a substandard basis, the calculation of any such adjusted
    premiums and present values may be based on such other table of mortality
    as may be specified by the insurer and approved by the director.
         On or after the operative date of this section as defined in
    subsection (14) of this section, any insurer may file with the director a
    written notice of its election to comply with the provisions of this
    subdivision after a specified date before January 1, 1966. After the
    filing of such notice, then upon such specified date (which shall be the
    operative date of this subdivision for such insurer), this subdivision
    shall become operative with respect to the ordinary policies thereafter
    issued by such insurer. If an insurer makes no such election, the
    operative date of this subdivision for such insurer shall be January 1,
    1966.
    (c)  This subsection (9)(c) shall not apply to industrial policies issued
    on or after the operative date of subsection (9)(d) as defined therein. In
    the case of industrial policies issued on or after the operative date of
    this subdivision as defined herein, all adjusted premiums and present
    values referred to in this section shall be calculated on the basis of the
    commissioners' 1961 standard industrial mortality table and the rate of
    interest specified in the policy for calculating cash surrender values and
    paid-up nonforfeiture benefits provided that such rate of interest shall
    not exceed three and one-half per cent (3 1/2%) per annum except that a
    rate of interest not exceeding four per cent (4%) per annum may be used
    for policies issued on or after July 1, 1973, and prior to July 1, 1977,
    and a rate of interest not exceeding five and one-half per cent (5 1/2%)
    per annum may be used for policies issued on or after July 1, 1977, except
    that for any single premium whole life or endowment insurance policy a
    rate of interest not exceeding six and one-half per cent (6 1/2%) per
    annum may be used. Provided, however, that in calculating 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 those shown in the commissioners' 1961 industrial
    extended term insurance table. Provided, further, that for insurance
    issued on a substandard basis, the calculation of any such adjusted
    premiums and present values may be based on such other table of mortality
    as may be specified by the insurer and approved by the director.
         After the effective date of this amendatory act, any insurer may file
    with the director a written notice of its election to comply with the
    provisions of this subdivision after a specified date before January 1,
    1968. After the filing of such notice, then upon such specified date
    (which shall be the operative date of this subdivision for such insurer),
    this subdivision shall become operative with respect to the industrial
    policies thereafter issued by such insurer. If an insurer makes no such
    election, the operative date of this subdivision for such insurer shall be
    January 1, 1968.
    (d)  (i)  Subsection (9)(d) shall apply to all policies issued on or after
         the operative date of this subsection (9)(d) as defined herein.
         Except as provided in paragraph vii of this subsection, the adjusted
         premiums for any policy shall be calculated on an annual basis and
         shall be such uniform percentage of the respective premiums specified
         in the policy for each policy year, excluding amounts payable as
         extra premiums to cover impairments or special hazards and also
         excluding any uniform annual contract charge or policy fee specified
         in the policy in a statement of the method to be used in calculating
         the cash surrender values and paid-up nonforfeiture benefits, that
         the present value, at the date of issue of the policy, of all
         adjusted premiums shall be equal to the sum of (A) the then present
         value of the future guaranteed benefits provided for by the policy;
         (B) one per cent (1%) of either the amount of insurance, if the
         insurance be uniform in amount, or the average amount of insurance at
         the beginning of each of the first ten (10) policy years; and (C) one
         hundred twenty-five per cent (125%) of the nonforfeiture net level
         premium as hereinafter defined. Provided, however, that in applying
         the percentage specified in (C) above, no nonforfeiture net level
         premium shall be deemed to exceed four per cent (4%) of either the
         amount of insurance, if the insurance be uniform in amount, or the
         average amount of insurance at the beginning of each of the first ten
         (10) policy years. The date of issue of a policy for the purpose of
         this subsection shall be the date as of which the rated age of the
         insured is determined.
         (ii)  The nonforfeiture net level premium shall be equal to the
         present value, at the date of issue of the policy, of the guaranteed
         benefits provided for by the policy divided by the present value, at
         the date of issue of the policy, of an annuity of one (1) per annum
         payable on the date of issue of the policy and on each anniversary of
         such policy on which a premium falls due.
         (iii)  In the case of policies which cause, on a basis guaranteed in
         the policy, unscheduled changes in benefits or premiums, or which
         provide an option for changes in benefits or premiums other than a
         change to a new policy, the adjusted premiums and present values
         shall initially be calculated on the assumption that future benefits
         and premiums do not change from those stipulated at the date of issue
         of the policy. At the time of any such change in the benefits or
         premiums, the future adjusted premiums, nonforfeiture net level
         premiums and present values shall be recalculated on the assumption
         that future benefits and premiums do not change from those stipulated
         by the policy immediately after the change.
         (iv)  Except as otherwise provided in paragraph vii of this
         subsection, the recalculated future adjusted premiums for any such
         policy shall be such uniform percentage of the respective future
         premiums specified in the policy for each policy year, excluding
         amounts payable as extra premiums to cover impairments and special
         hazards, and also excluding any uniform annual contract charge or
         policy fee specified in the policy in a statement of the method to be
         used in calculating the cash surrender values and paid-up
         nonforfeiture benefits, that the present value, at the time of change
         to the newly defined benefits or premiums, of all such future
         adjusted premiums shall be equal to the excess of the sum of (A) the
         then present value of the then future guaranteed benefits provided
         for by the policy and (B) the additional expense allowance, if any,
         over the then cash surrender value, if any, or present value of any
         paid-up nonforfeiture benefit under the policy.
         (v)  The additional expense allowance, at the time of the change to
         the newly defined benefits or premiums, shall be the sum of (A) one
         per cent (1%) of the excess, if positive, of the average amount of
         insurance at the beginning of each of the first ten (10) policy years
         subsequent to the change over the average amount of insurance prior
         to the change at the beginning of each of the first ten (10) policy
         years subsequent to the time of the most recent previous change, or,
         if there has been no previous change, the date of issue of the
         policy; and (B) one hundred twenty-five per cent (125%) of the
         increase, if positive, in the nonforfeiture net level premium.
         (vi)  The recalculated nonforfeiture net level premium shall be equal
         to the result obtained by dividing (A) by (B) where
              (A) equals the sum of
                   1.  the nonforfeiture net level premium applicable prior to
                   the change, times the present value of an annuity of one
                   (1) per annum payable on each anniversary of the policy on
                   or subsequent to the date of the change on which a premium
                   would have fallen due had the change not occurred, and
                   2.  the present value of the increase in future guaranteed
                   benefits provided for by the policy, and
              (B) equals the present value of an annuity of one (1) per annum
              payable on each anniversary of the policy on or subsequent to
              the date of change on which a premium falls due.
         (vii)  Notwithstanding any other provisions of this subsection to the
         contrary, in the case of a policy issued on a substandard basis which
         provides reduced graded amounts of insurance so that, in each policy
         year, such policy has the same tabular mortality cost as an otherwise
         similar policy issued on the standard basis which provides higher
         uniform amounts of insurance, adjusted premiums and present values,
         for such substandard policy may be calculated as if it were issued to
         provide such higher uniform amounts of insurance on the standard
         basis.
         (viii)  All adjusted premiums and present values referred to in this
         section shall, for all policies of ordinary insurance, be calculated
         on the basis of (A) the commissioners 1980 standard ordinary
         mortality table or (B) at the election of the insurer for any one or
         more specified plans of life insurance, the commissioners 1980
         standard ordinary mortality table with ten-year select mortality
         factors; shall, for all policies of industrial insurance, be
         calculated on the basis of the commissioners 1961 standard industrial
         mortality table; and shall for all policies issued in a particular
         calendar year be calculated on the basis of a rate of interest not
         exceeding the nonforfeiture interest rate as defined in this
         subsection, for policies issued in that calendar year. Provided,
         however, that:
                   1.  At the option of the insurer, calculations for all
                   policies issued in a particular calendar year may be made
                   on the basis of a rate of interest not exceeding the
                   nonforfeiture interest rate, as defined in this subsection,
                   for policies issued in the immediately preceding calendar
                   year.
                   2.  Under any paid-up nonforfeiture benefit, including any
                   paid-up dividend additions, any cash surrender value
                   available, whether or not required by subsection (2) shall
                   be calculated on the basis of the mortality table and rate
                   of interest used in determining the amount of such paid-up
                   nonforfeiture benefit and paid-up dividend additions, if
                   any.
                   3.  An insurer may calculate the amount of any guaranteed
                   paid-up nonforfeiture benefit including any paid-up
                   additions under the policy on the basis of an interest rate
                   no lower than that specified in the policy for calculating
                   cash surrender values.
                   4.  In calculating 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 those shown in the commissioners 1980
                   extended term insurance table for policies of ordinary
                   insurance and not more than the commissioners 1961
                   industrial extended term insurance table for policies of
                   industrial insurance.
                   5.  For insurance issued on a substandard basis, the
                   calculation of any such adjusted premiums and present
                   values may be based on appropriate modifications of the
                   aforementioned tables.
                   6.  Any ordinary mortality tables, adopted after 1980 by
                   the national association of insurance commissioners, that
                   are approved by regulation promulgated by the director for
                   use in determining the minimum nonforfeiture standard may
                   be substituted for the commissioners 1980 standard ordinary
                   mortality table with or without ten-year select mortality
                   factors or for the commissioners 1980 extended term
                   insurance table.
                   7.  Any industrial mortality tables, adopted after 1980 by
                   the national association of insurance commissioners, that
                   are approved by regulation promulgated by the commissioner
                   for use in determining the minimum nonforfeiture standard
                   may be substituted for the commissioners 1961 standard
                   industrial mortality table or the commissioners 1961
                   industrial extended term insurance table.
         (ix)  The nonforfeiture interest rate per annum for any policy issued
         in a particular calendar year shall be equal to one hundred
         twenty-five per cent (125%) of the interest rate used in determining
         the minimum standard for the valuation of such policy as defined in
         the standard valuation law, rounded to the nearer one-quarter of one
         per cent (1/4 of 1%).
         (x)  Notwithstanding any other provision in this code to the
         contrary, any refiling of nonforfeiture values or their methods of
         computation for any previously approved policy form which involves
         only a change in the interest rate or mortality table used to compute
         nonforfeiture values shall not require refiling of any other
         provisions of that policy form.
         (xi)  After the effective date of subsection (9)(d), any insurer may
         file with the director a written notice of its election to comply
         with the provisions of this subsection after a specified date before
         January 1, 1989, which shall be the operative date of this subsection
         for such insurer. If an insurer makes no such election, the operative
         date of this subsection for such insurer shall be January 1, 1989.
    (10)  In the case of any plan of life insurance which provides for future
premium determination, the amounts of which are to be determined by the
insurer based on the then estimates of future experience, or in the case of
any plan of life insurance which is of such a nature that minimum values
cannot be determined by the methods described in subsections (2) through (9)
herein, then:
    (a)  The director must be satisfied that the benefits provided under the
    plan are substantially as favorable to policyholders and insureds as the
    minimum benefits otherwise required by subsections (2) through (9) herein;
    (b)  The director must be satisfied that the benefits and the pattern of
    premiums of that plan are not such as to mislead prospective policyholders
    or insureds;
    (c)  The cash surrender values and paid-up nonforfeiture benefits provided
    by such plan must not be less than the minimum values and benefits
    required for the plan computed by a method consistent with the principles
    of this standard nonforfeiture law for life insurance, as determined by
    regulations promulgated by the director.
    (11)  Calculation of values: Any cash surrender value and any paid-up
nonforfeiture benefit available under the policy in the event of default in a
premium payment due at any time other than on the policy anniversary shall be
calculated with allowance for the lapse of time and the payment of fractional
premiums beyond the last preceding policy anniversary. All values referred to
in subsections (4) through (9) of this section may be calculated upon the
assumption that any death benefit is payable at the end of the policy year of
death. The net value of any paid-up additions, other than paid-up term
additions, shall be not less than the amounts used to provide such additions.
Notwithstanding the provisions of subsection (4) of this section, additional
benefits payable:
    (a)  In the event of death or dismemberment by accident or accidental
    means,
    (b)  In the event of total and permanent disability,
    (c)  As reversionary annuity or deferred reversionary annuity benefits,
    (d)  As term insurance benefits provided by a rider or supplemental policy
    provision to which, if issued as a separate policy, this section would not
    apply,
    (e)  As term insurance on the life of a child or on the lives of children
    provided in a policy on the life of a parent of the child, if such term
    insurance expires before the child's age is twenty-six (26), is uniform in
    amount after the child's age is one (1), and has not become paid-up by
    reason of the death of a parent of the child, and
    (f)  As other policy benefits additional to life insurance and endowment
    benefits, and premiums for all such additional benefits, shall be
    disregarded in ascertaining cash surrender values and nonforfeiture
    benefits required by this section, and no such additional benefits shall
    be required to be included in any paid-up nonforfeiture benefits.
    (12)  This subsection, in addition to all other applicable subsections of
this section, shall apply to all policies issued on or after January 1, 1986.
Any cash surrender value available under the policy in the event of default in
a premium payment due on any policy anniversary shall be in an amount which
does not differ by more than two-tenths of one per cent (2/10 of 1%) of either
the amount of insurance, if the insurance be uniform in amount, or the average
amount of insurance at the beginning of each of the first ten (10) policy
years, from the sum of:
    (a)  The greater of zero and the basic cash value hereinafter specified;
    and
    (b)  The present value of any existing paid-up additions less the amount
    of any indebtedness to the insurer under the policy.
    The basic cash value shall be equal to the present value, on such
anniversary, of the future guaranteed benefits which would have been provided
for by the policy, excluding any existing paid-up additions and before
deduction of any indebtedness to the insurer, if there had been no default,
less the then present value of the nonforfeiture factors, as hereinafter
defined, corresponding to premiums which would have fallen due on and after
such anniversary. Provided, however, that the effects on the basic cash value
of supplemental life insurance or annuity benefits or of family coverage, as
described in subsection (4) or (8), whichever is applicable, shall be the same
as are the effects specified in subsection (4) or (8), whichever is
applicable, on the cash surrender values defined in that subsection.
    The nonforfeiture factor for each policy year shall be an amount equal to
a percentage of the adjusted premium for the policy year, as defined in
subsection (6) or (9)(d), whichever is applicable. Except as is required by
the next succeeding sentence of this paragraph, such percentage:
    (a)  Must be the same percentage for each policy year between the second
    policy anniversary and the later of (i) the fifth policy anniversary and
    (ii) 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 per cent (2/10 of 1%) of either the amount of insurance, if the
    insurance be uniform in amount, or the average amount of insurance at the
    beginning of each of the first ten (10) policy years; and
    (b)  Must be such that no percentage after the later of the two (2) policy
    anniversaries specified in the preceding paragraph (a) may apply to fewer
    than five (5) consecutive policy years.
    Provided, that no basic cash value may be less than the value which would
be obtained if the adjusted premiums for the policy, as defined in subsection
(6) or (9)(d), whichever is applicable, were substituted for the nonforfeiture
factors in the calculation of the basic cash value.
    All adjusted premiums and present values referred to in this subsection
shall, for a particular policy, be calculated on the same mortality and
interest basis as are used in demonstrating the policy's compliance with the
other subsections of this section. The cash surrender values referred to in
this subsection shall include any endowment benefits provided for by the
policy.
    Any cash surrender value available other than in the event of default in a
premium payment due on a policy anniversary, and the amount of any paid-up
nonforfeiture benefit available under the policy in the event of default in a
premium payment shall be determined in manners consistent with the manners
specified for determining the analogous minimum amounts in subsections (2),
(3), (4), (5), (9)(d) and (11). The amounts of any cash surrender values and
of any paid-up nonforfeiture benefits granted in connection with additional
benefits such as those listed as items (a) through (f) in subsection (11)
shall conform with the principles of this subsection (12).
    (13)  Exceptions. This section shall not apply to any of the following:
    (a)  Reinsurance,
    (b)  Group insurance,
    (c)  Variable life insurance,
    (d)  Pure endowment,
    (e)  Annuity or reversionary annuity contract,
    (f)  Term policy of uniform amount which provides no guaranteed
    nonforfeiture or endowment benefits, or renewal thereof, of twenty (20)
    years or less expiring before age seventy-one (71), for which uniform
    premiums are payable during the entire term of the policy,
    (g)  Term policy of decreasing amount, which provides no guaranteed
    nonforfeiture or endowment benefits, on which each adjusted premium,
    calculated as specified in subsections (6) through (9) of this section, is
    less than the adjusted premiums so calculated on a policy of uniform
    amount, or renewal thereof, which provides no guaranteed nonforfeiture or
    endowment benefits, issued at the same age and for the same initial amount
    of insurance and for a term of twenty (20) years or less expiring before
    age seventy-one (71), for which uniform premiums are payable during the
    entire term of the policy;
    (h)  Policy, which provides no guaranteed nonforfeiture or endowment
    benefits, for which no cash surrender value, if any, or present value of
    any paid-up nonforfeiture benefit, at the beginning of any policy year,
    calculated as specified in subsections (4) through (9) of this section,
    exceeds two and one-half per cent (2 1/2%) of the amount of insurance at
    the beginning of the same policy year;
    (i)  Policy which shall be delivered outside this state through an agent
    or other representative of the insurer issuing the policy.
For purposes of determining the applicability of this section, the age at
expiry for a joint term life insurance policy shall be the age at expiry of
the oldest life.
    (14)  Operative date. After January 1, 1962, any insurer may file with the
director a written notice of its election to comply with the provisions of
this section after a specified date before January 1, 1963. After the filing
of such notice, then upon such specified date (which shall be the operative
date for such insurer) this section shall become operative with respect to the
policies thereafter issued by such insurer. If an insurer makes no such
election, the operative date of this section for such insurer shall be January
1, 1963.