Mich. Admin. Code R. 500.849 - Variable life insurance policy; benefit and design requirements

Rule 9. Variable life insurance policies delivered or issued for delivery in this state shall comply with all of the following minimum requirements:

(a) The mortality and expense risk shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract. If mortality and expense charges are lower than the guaranteed maximums, the difference shall be credited to the policy account at least annually.

(b) For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy if premiums are paid when due, subject to the provisions of R 500.851(b).

(c) The policy shall reflect the investment experience of the 1 or more variable life insurance separate accounts established and maintained by the insurer. The insurer shall demonstrate that the reflection of investment experience in the variable life insurance policy is actuarially sound.

(d) Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.

(e) Changes in variable death benefits of each variable life insurance policy shall be determined at least annually.

(f) The policy value and the cash surrender value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other nonforfeiture benefits, as described either in the policy or in a statement filed with the commissioner, shall be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation shall be such that, if the net investment return credited to the policy at all times from the date of issue is equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other nonforfeiture benefits shall be at least equal to the minimum values required by section 4060 of Act No. 218 of the Public Acts of 1956, as amended, being S500.4060 of the Michigan Compiled Laws, for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the standard nonforfeiture law of this state. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.

(g) The policy value, cash value, and other nonforfeiture benefits of each variable life insurance policy shall be determined in accordance with the provisions of R 500.849a.

(h) The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are approved by the commissioner.

Notes

Mich. Admin. Code R. 500.849

1979 AC; 1988 AACS