211 CMR 95.08 - Insurance Policy Requirements - Mandatory Policy Provisions

Current through Register 1466, April 1, 2022

No variable life insurance policy shall be delivered or issued for delivery in the Commonwealth unless it conforms in substance to the following provisions, or provisions more favorable to the holder of such policies:

(1) A cover page or pages containing:
(a) a prominent statement, in either contrasting color or in boldface type, that the premium is flexible or fixed and that the amount or duration of the death benefit may be variable or fixed under specified conditions and may increase or decrease;
(b) for scheduled premium policies, a prominent statement, in either contrasting color or in boldface type, that a premium at a guaranteed rate is necessary to sustain the policy in force to policy maturity;
(c) a prominent statement, in either contrasting color or in boldface type, that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;
(d) a statement describing any minimum death benefit required pursuant to 211 CMR 95.07(3) or provided in the policy;
(e) for flexible premium policies which do not have a guaranteed death benefit until the maturity date of the policy, a prominent statement, in either contrasting color or in boldface type, explaining that the applicant could lose his or her entire investment, depending on the performance of the fund, and that as a result there could be no death benefit absent additional payments made to keep the policy in force;
(f) the method for determining the amount of insurance payable at death, or a reference to the policy provision which describes the method;
(g) a captioned provision which provides that the policyholder may return the variable life insurance policy to the insurer or insurance producer thereof from whom it was purchased within ten days of receipt of the policy and receive a refund of all premium payments for such policy; and
(h) such other items as are currently required for general account life insurance policies and which are not inconsistent with 211 CMR 95.00.
(2) A complete description of all charges to be made under the policy, including front end loads, back end loads and surrender charges, containing the following information:
(a) all charges shall be identified by their purpose, including, but not limited to identification by kind of administrative charge, cost of insurance or other charge;
(b) all charges shall be clearly described together in one section of the policy;
(c) the description shall specify guaranteed maximum charges (in dollar amounts or proportions) for each type of charge and the time period covered by such charge;
(d) the maximum cost of insurance charges shall be stated separately in the policy from any other charges made under the policy;
(e) premiums or charges for incidental insurance benefits, shall be stated separately; and
(f) the sources of payment for each type of charge shall be clearly explained.
(3) A disclosure of the policyholder's risk classification.
(4) For scheduled premium policies, a provision for a grace period of not less than 31 days from the premium due date which shall provide:
(a) that where the premium is paid within the grace period, policy values will be the same as if the premium had been paid on or before the due date; and
(b) that where the insured dies during the grace period without having paid the premium, the policy benefits will be the same as if the premium had been paid on or before the due date, except for the deduction of the overdue premium.
(5) For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the Report to Policyholders required by 211 CMR 95.13(1)(c). The death benefit payable during the grace period will equal the death benefit in effect immediately prior to such period less any overdue charges. If the policy processing days occur monthly, the insurer may require the payment of not more than three times the charges which were due on the policy processing day on which the amounts available under the policy were insufficient to pay all charges authorized by the policy that are necessary to keep such policy in force until the next policy processing day.
(6) For scheduled premium policies, a provision that the policy will be reinstated at any time within three years from the date of default upon evidence of insurability, unless the net cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with the accrued interest thereon to the date of reinstatement and the payment of an amount not exceeding the greater of (a) or (b), plus (c):
(a) all overdue premiums (other than for incidental insurance benefits) and any other indebtedness in effect at the end of the grace period following the date of default with interest at a rate stated in the policy not exceeding that permitted by law; or
(b) 110% of the increase in cash value resulting from reinstatement;
(c) all overdue premiums for incidental insurance benefits with interest at a rate stated in the policy not exceeding that permitted by law.
(7) A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy.
(8) A provision designating any separate account to be used and stating with respect to each such account that:
(a) the assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account;
(b) such separate account shall be used only to fund variable policy benefits, and such other benefits, as applicable, flowing from a variable life insurance policy, which may be permitted by 211 CMR 95.00, and
(c) the assets of such separate account shall be valued at least as often as any policy benefits vary but at least monthly.
(9) If the policy is in force and does not provide for a fixed investment option, a provision that at any time during the first 24 policy months, so long as the policy is in force, the owner may exchange the policy without evidence of insurability for a policy of permanent general account life insurance on the life of the insured for the same amount of insurance as the initial face amount of the variable life insurance policy, and on a plan of insurance specified in the policy, subject to the following requirements:
(a) the new policy shall bear the same date of issue and the issue age as the variable life insurance policy;
(b) the new policy shall be issued on a substantially comparable plan of permanent insurance offered in the Commonwealth by the insurer (or if not available from the insurer, by a subsidiary of the insurer, its parent or an affiliate licensed to do a life insurance business in the Commonwealth) with the same date of issue of the variable life insurance policy and at the premium rates in effect on that date for the same class of risk;
(c) the new policy shall include such incidental insurance benefits as were included in the variable life insurance policy if such incidental insurance benefits were then available for issue with the new policy; and
(d) the exchange shall be subject to an equitable premium or cash value adjustment that takes appropriate account of the premiums and cash values under the original and new policies. A detailed statement of the method of computing such adjustment shall be filed with the Commissioner.
(10) A provision that:
(a) if the policy is in force other than under a fixed nonforfeiture benefit or if the policy is being continued under a variable nonforfeiture benefit payment of variable death benefits in excess of any minimum death benefits, net cash surrender values, policy loans or partial withdrawals (except when used to pay premiums), or partial surrenders may be deferred for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission had determined that a state of emergency exists which may make such payment impractical; and
(b) if the policy is being continued under a fixed nonforfeiture benefit, or to the extent benefits are being paid from the general account, payment of any net cash surrender value or loan may be deferred for up to six months from the date of request or as otherwise may be permitted by law or regulation, however no deferral shall be made without reasonable grounds therefor.
(11) For scheduled premium policies, a provision for nonforfeiture insurance benefits so that at least one such benefit is offered on a fixed basis from the due date of the premium in default; however, a given nonforfeiture option need not be offered on both a fixed and a variable basis. In addition, a summary of the method of computing the cash value and net cash surrender value under the policy, including a description of the basis and the interest assumption, shall be included. Any surrender charges shall be shown in a table in the policy, as well as described in the policy together with the other charges to be deducted as required by 211 CMR 95.05 and 95.08. The insurer may establish a reasonable minimum net cash surrender value below which any nonforfeiture insurance options will not be available, but the policyholder shall have the right to receive a lump sum cash payment.
(12) A provision for policy loans after the policy has been in force for three years which is not less favorable to the policyholder than the following:
(a) the loan value available shall be at least equal to 75% of the policy's cash surrender value;
(b) the amount borrowed shall bear interest at a rate stated in or determined by the terms of the policy not to exceed the rate permitted by state insurance law;
(c) any indebtedness shall be deducted from the proceeds payable on death;
(d) any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any nonforfeiture benefit;
(e) for scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of intent to cancel the policy if the excess indebtedness is not repaid within 31 days after the date of mailing of such notice; for flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next following policy processing day exceed, unless otherwise provided in the policy, the net cash surrender value under the policy to pay such charges, a report must be sent to the policyholder containing the information specified by 211 CMR 95.13(1)(c);
(f) no policy loan provision is required if the policy is under the extended insurance nonforfeiture option;
(g) all policy loan, partial withdrawal, and partial surrender provisions shall be so constructed that variable life insurance policyholders who have not exercised such provision are not disadvantaged by the exercise thereof; and
(h) amounts paid to the policyholders upon the exercise of any policy loan, partial withdrawal, or partial surrender provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amounts for policy loans from the general account.
(13) In the event the proceeds of the policy are payable in fixed installments or as a fixed annuity, a table showing the amounts of the installments or annuity payments.
(14) A provision that in the event of a material change in the investment policy of a separate account, any policyholder objecting to such change shall have, without evidence of insurability, the conversion options available under 211 CMR 95.04(4); that the insurer will give appropriate notice to such objecting policyholder of the options available; and that the option to convert is exercisable within 60 days after:
(a) the effective date of such change in the investment policy; or
(b) the receipt of the notice of the options available, whichever is later.
(15) A provision that the policy shall be incontestable by the insurer after it has been in force for two years during the lifetime of the insured, provided, however, that any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after any such increase has been in force, during the lifetime of the insured, for two years from the effective date of such increase.
(16) A description of how loans are charged against separate accounts and the effect on such accounts when a loan is made or repaid.
(17) A provision for credit on loaned amounts at a rate at least equal to the loan interest rate less 2% unless the Commissioner allows crediting of a lower rate of interest upon an insurer demonstrating a justification for such lower rate.
(18) For scheduled premium policies which permit the insurer to adjust premiums, a provision stating the frequency with which premiums will be reviewed to determine whether an adjustment should be made.
(19) If settlement options are provided, at least one such option to be provided on a fixed basis only.
(20) A description of the basis for computing the cash value and the cash surrender value under the policy.
(21) Specification of a guaranteed minimum rate of interest for the portion of the fund accumulated in a fixed investment option.
(22) Any other policy provisions required for general account life insurance policies and not inconsistent with 211 CMR 95.00.

Notes

211 CMR 95.08

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