Utah Admin. Code R590-148-14 - Nonforfeiture and Contingent Benefit Requirements

(1) To comply with the requirement to offer a nonforfeiture benefit under Section 31A-22-1412:

(a) a policy or certificate offered with nonforfeiture benefits shall have coverage elements, eligibility, benefit triggers, and benefit length that are the same as coverage to be issued without nonforfeiture benefits;

(b) the nonforfeiture benefit included in the offer shall be the benefit described in Subsection (4); and

(c) the offer shall be in writing if the nonforfeiture benefit is not otherwise described in the outline of coverage or other materials given to the prospective policyholder.

(2) If the offer required under Section 31A-22-1412 is rejected, the insurer shall provide the contingent benefit upon lapse as described in this section.

(3)

(a) After rejection of the offer required under Section 31A-22-1412, for individual and group policies without nonforfeiture benefits issued after July 1, 2002, the insurer shall provide a contingent benefit upon lapse.

(b) If a group policyholder elects to make the nonforfeiture benefit an option to a certificate holder, a certificate shall provide either the nonforfeiture benefit or the contingent benefit upon lapse.

(c)

(i) A contingent benefit upon lapse shall be triggered each time an insurer:

(A) increases the premium rates to a level that results in a cumulative increase of the annual premium, based on the insured's issue age, equal to or exceeding the percentage of the insured's initial annual premium shown in the Triggers for a Substantial Premium Increase; and

(B) the policy or certificate lapses within 120 days of the due date of the increased premium.

(ii) Unless otherwise required, each policyholder shall be notified at least 30 days before the due date of the increased premium.

(d) On or before the effective date of a substantial premium increase, the insurer shall:

(i) offer to reduce policy benefits provided by the current coverage without additional underwriting so required premium payments are not increased;

(ii) offer to convert the coverage to a paid-up status with a shortened benefit period under Subsection (4), if elected at any time during the 120-day period referenced in Subsection (3)(c)(i)(B); and

(iii) notify the insured that a default or lapse at any time during the 120-day period referenced in Subsection (3)(c)(i)(B) is an election of the offer to convert in Subsection (3)(d)(ii).

(4) Benefits continued as nonforfeiture benefits, including contingent benefits upon lapse, are described in this subsection.

(a)

(i) For purposes of this subsection, the nonforfeiture benefit shall be a shortened benefit period providing paid-up long-term care insurance coverage after lapse;

(ii) the same benefits, amounts, and frequency in effect at the time of lapse, but not increased thereafter, will be payable for a qualifying claim; and

(iii) the lifetime maximum dollars or days of benefits shall be determined under Subsection (4)(b).

(b)

(i) The standard nonforfeiture credit shall be equal to 100% of the sum of all premiums paid, including the premiums paid before any changes in benefits.

(ii) An insurer may offer additional shortened benefit period options, if the benefits for each duration equal or exceed the standard nonforfeiture credit for that duration.

(iii) The minimum nonforfeiture credit may not be less than 30 times the daily nursing home benefit at the time of lapse.

(iv) The calculation of the nonforfeiture credit is subject to Subsection (5).

(c)

(i)

(A) The nonforfeiture benefit shall begin no later than the end of the third year following the policy or certificate issue date.

(B) The contingent benefit upon lapse shall be effective during the first three years and thereafter.

(ii) Notwithstanding Subsection (4)(c)(i), for a policy or certificate with attained age rating, the nonforfeiture benefit shall begin on the earlier of:

(A) the end of the tenth year following the policy or certificate issue date; or

(B) the end of the second year following the date the policy or certificate is no longer subject to attained age rating.

(d) Nonforfeiture credits may be used for all care and services that qualify for benefits under the terms of the policy or certificate, up to the limits specified in the policy or certificate.

(5) All benefits paid by the insurer while the policy or certificate is in premium paying status, and in the paid-up status, may not exceed the maximum benefits that would be payable if the policy or certificate had remained in premium paying status.

(6) There is no difference in the minimum nonforfeiture benefits under this section for a group or individual policy.

(7)

(a) Except as provided in Subsection (7)(b), the requirements set forth in this section are effective January 1, 2003, and apply to a policy issued in this state on or after July 1, 2002.

(b) This section does not apply to a certificate issued on or after July 1, 2002, under a group policy that was in force on January 1, 2002.

(8) A premium charged for a policy or certificate containing a nonforfeiture benefit or a contingent benefit upon lapse is subject to the loss ratio requirements of Section R590-148-22 treating the policy as a whole.

(9) To determine whether a contingent nonforfeiture upon lapse provision is triggered under Subsection (3)(c), a replacing insurer that purchased or otherwise assumed a block of policies from another insurer shall calculate the percentage increase based on the initial annual premium paid by the insured when the policy was first purchased from the original insurer.

(10) A nonforfeiture benefit for a qualified long-term care insurance contract offering a level premium shall:

(a) be appropriately captioned;

(b) provide a benefit available in the event of a default in the payment of a premium and state that the amount of the benefit may be adjusted after being initially granted as necessary to reflect a change in claims, persistency, and interest as reflected in a change in rates for a premium paying contract approved by the commissioner for the same contract form; and

(c) provide at least one of the following:

(i) reduced paid-up insurance;

(ii) extended term insurance;

(iii) shortened benefit period; or

(iv) a similar offering approved by the commissioner.

Notes

Utah Admin. Code R590-148-14

Adopted by Utah State Bulletin Number 2024-21, effective 10/22/2024