Utah Admin. Code R590-285-22 - Nonforfeiture Benefit and Contingent Benefit Upon Lapse Requirement

(1)

(a) A policy or certificate offered with a nonforfeiture benefit 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 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 a policy does not offer a nonforfeiture benefit, the policy shall include a contingent benefit upon lapse described in this section.

(3)

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

(b)

(i) A contingent benefit upon lapse shall be triggered every time an insurer increases the premium rates to a level that results in a cumulative increase of the annual premium equal to or exceeding 50% of the insured's initial annual premium.

(ii) Unless otherwise required, the insurer shall notify an insured at least 45 days before the due date of the premium reflecting the rate increase.

(c) On or before the effective date of a substantial premium increase described in Subsection (3)(b), an insurer shall:

(i) offer to reduce the policy benefits provided by the current coverage consistent with the requirements of Section R590-285-21 so required premium payments are not increased;

(ii) offer to convert the coverage to a paid-up status with a shortened benefit period in accordance with the terms of Subsection (4) at any time during the 45-day period in Subsection (3)(b); and

(iii) notify the policyholder or certificate holder that a default or lapse at any time during the 45-day period in Subsection (3)(b) shall be considered the election of the offer to convert under Subsection (3)(c)(ii).

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

(a) A nonforfeiture benefit shall be a shortened benefit period providing paid-up limited long-term care insurance after lapse.

(i) The same benefits, amounts, and frequency in effect at the time of lapse, but not increased thereafter, shall be payable for a qualifying claim.

(ii) The lifetime maximum dollars or days of benefits shall be determined under Subsection (4)(c).

(b) A standard nonforfeiture credit shall be equal to 100% of the sum of all premiums paid, including the premiums paid before a change in benefits.

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

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

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

(d) A contingent benefit upon lapse is effective during the first three years and thereafter.

(e) A nonforfeiture credit may be used for care and services that qualify for benefits under the policy or certificate, up to the policy or certificate limits.

(5) All benefits paid by an insurer while a 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) To determine whether a contingent benefit upon lapse or nonforfeiture benefit provision is triggered under Subsection (3)(b), a replacing insurer that purchased or otherwise assumed a block or blocks 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.

Notes

Utah Admin. Code R590-285-22

Adopted by Utah State Bulletin Number 2021-05, effective 2/23/2021 Adopted by Utah State Bulletin Number 2024-21, effective 10/22/2024