2014 Kentucky Revised Statutes CHAPTER 304 - INSURANCE CODE Subtitle 15 - Life Insurance and Annuity Contracts 15.15-342 Adjusted premiums operative at option of insurer or on January 1, 1989.
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304.15-342 Adjusted premiums operative at option of insurer or on January 1,
1989.
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(2)
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This section shall apply to all policies issued on or after the effective date of
this section as defined in subsection (11) of this section. Except as provided in
subsection (7) 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
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 percent (1%) of either 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 ten (10) policy years; and
(c) One hundred twenty-five percent (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 percent (4%)
of either 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 ten (10)
policy years. This date of issue of a policy for the purpose of this section shall
be the date as of which the rated age of the insured is determined.
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.
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.
Except as otherwise provided in subsection (7) of this section, 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
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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
(a) the sum of the then present value of the then future guaranteed benefits
provided for by the policy and the additional expense allowance, if any, over (b)
the then cash surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
The additional expense allowance, at the time of the change to the newly
defined benefits or premiums, shall be the sum of:
(a) One percent (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 percent (125%) of the increase, if positive, in the
nonforfeiture net level premium.
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.
Notwithstanding any other provisions of this section 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.
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
1980 standard ordinary mortality table or at the election of the insurer for any
one (1) 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 section
for policies issued in that calendar year. Provided, however, that:
(a) 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 section, for
policies issued in the immediately preceding calendar year;
(b) Under any paid-up nonforfeiture benefit, including any paid-up dividend
additions, any cash surrender value available, whether or not required by
KRS 304.15-310, 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;
(c) Any 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;
(d) 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;
(e) 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;
(f) Any ordinary 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 1980
standard ordinary mortality table with or without ten-year select mortality
factors or for the commissioners 1980 extended term insurance table; and
(g) 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.
(9) The nonforfeiture interest rate per annum for any policy issued in a particular
calendar year shall be equal to one hundred twenty-five percent (125%) of the
calendar year statutory valuation interest rate for such policy as defined in KRS
304.6-130 to 304.6-180, inclusive to the nearer one quarter of one percent
(0.25%).
(10) 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.
(11) Any insurer may file with the commissioner a written notice of its election to
comply with the provisions of this section after a specified date before January
1, 1989, which shall be the effective date of this section for such insurer. If an
insurer makes no such election, the effective date of this section for such
insurer shall be January 1, 1989.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1185, effective July 15, 2010. -Created 1982 Ky. Acts ch. 263, sec. 4, effective July 15, 1982.
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