W. Va. Code R. § 114-11D-4

Current through Register Vol. XLI, No. 50, December 13, 2024

Section 114-11D-4 - Insurance Policy Requirements

4.1. Policy Qualification. The Commissioner may not approve any variable life insurance form filed pursuant to this rule unless it conforms to the requirements of this section.

4.2. Filing of Variable Life Insurance Policies. All variable life insurance policies, and all riders, endorsements, applications and other documents that are to be attached to be made a part of the policy and which relate to the variable nature of the policy, shall be filed with the Commissioner and approved by him or her prior to delivery or issuance for delivery in this state.

4.2.a. The procedures and requirements for filing and approval shall be, to the extent appropriate and not inconsistent with this rule, the same as those otherwise applicable to other life insurance policies.

4.2.b. The Commissioner may approve variable life insurance policies and related forms with provisions the Commissioner deems to be not less favorable to the policyholder and the beneficiary than those required by this rule.

4.3. Mandatory Policy Benefit and Design Requirements. Variable life insurance policies delivered or issued for delivery in this state shall comply with the following minimum requirements.

4.3.a. Mortality and expense risks shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract.

4.3.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 so long as premiums are duly paid (subject to the provisions of subsection 4.5 of this section);

4.3.c. The policy shall reflect the investment experience of one or more 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.

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

4.3.e. Any changes in variable death benefits of a variable life insurance policy shall be determined at least annually.

4.3.f. The cash 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 of the state in which the policy is delivered, or issued for delivery, 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 should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values to the minimum values required by W. Va. Code § 33-13-30 for a general account policy with such premiums and benefits. The assumed investment rate may not exceed the maximum interest rate permitted under the standard nonforfeiture law of this state found in W.Va. Code § 33-13-30. If the policy does not contain an assumed investment rate this demonstration shall be based on the maximum interest rate permitted under the Standard Nonforfeiture Law. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not 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.

4.3.g. The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the Commissioner.

4.4. Mandatory Policy Provisions. Every variable life insurance policy filed for approval in this state shall contain at least the following:

4.4.a. The cover page or pages corresponding to the cover page of each policy shall contain:

4.4.a.1. A prominent statement in either contrasting color or in bold-faced type that the amount or duration of death benefit may be variable or fixed under specified conditions;

4.4.a.2. A prominent statement in either contrasting color or in bold-faced type that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;

4.4.a.3. A statement describing any minimum death benefit required pursuant to subdivision b, subsection 4.3 of this section;

4.4.a.4. The method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death;

4.4.a.5. Every variable life insurance policy, certificate or contract issued to a person in this state shall have the notice prominently printed on the first page of the policy, certificate or contract stating in substance that the insured person or person obtaining the policy shall have the right to return the policy, certificate or contract within ten days of its receipt and to have the premium refunded if, after examination of the policy, certificate or contract, the person obtaining the insurance is not satisfied for any reason; and

4.4.b.

4.4.b.1. For scheduled premium policies, a provision for a grace period of not less than thirty-one (31) days from the premium due date which shall provide that when the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.

4.4.b.2. 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. The grace period shall end on a date not less than sixty-one (61) days after the mailing date of the Report to Policyholders required by subdivision c, subsection 9.1 of this rule.

4.4.b.3. 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 (3) times the charges that 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 the policy in force until the next policy processing day.

4.4.c. For scheduled premium policies, a provision that the policy will be reinstated at any time within three (3) years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the 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 accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:

4.4.c.1. All overdue premiums with interest at a rate not exceeding six percent (6%) per annum compounded annually and any indebtedness in effect at the end of the grace period following the date of default with interest at a rate not exceeding six percent (6%) per annum compounded annually; or

4.4.c.2. One hundred ten percent (110%) of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding six percent (6%) per annum compounded annually.

4.4.d. 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;

4.4.e. A provision designating the separate account to be used and stating that:

4.4.e.1. The assets of the 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.

4.4.e.2. The assets of the separate account shall be valued at least as often as any policy benefits vary but at least monthly.

4.4.f. A provision specifying what documents constitute the entire insurance contract under state law;

4.4.g. A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer and an indication that statements by the insured, or on his or her behalf, shall be considered as representations and not warranties;

4.4.h. An identification of the owner of the insurance contract;

4.4.i. A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation;

4.4.j. A statement of any conditions or requirements concerning the assignment of the policy;

4.4.k. A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

4.4.l. A provision that the policy shall be incontestable by the insurer after it has been in force for two (2) years during the lifetime of the insured. However, any increase in the amount of the policy's death benefits subsequent to the policy issue date, which 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 the increase has been in force, during the lifetime of the insured, for two (2) years from the date of issue of increase;

4.4.m. A provision stating that the investment policy of the separate account may not be changed without the approval of the insurance commissioner of the state of domicile of the insurer, and that the approval process is on file with the Commissioner;

4.4.n. A provision that payment of variable death benefits in excess of any minimum death benefits, cash values, policy loans or partial withdrawals (except when used to pay premiums) or partial surrenders may be deferred:

4.4.n.1. For up to six (6) months from the date of request, if the payments are based on policy values which do not depend on the investment performance of the separate account; or

4.4.n.2. Otherwise, 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 has determined that a state of emergency exists which may make such payment impractical;

4.4.o. If settlement options are provided, at least one option shall be provided on a fixed basis only;

4.4.p. A description of the basis for computing the cash value and the surrender value under the policy shall be included;

4.4.q. Premiums or charges for incidental insurance benefits shall be stated separately;

4.4.r. Any other policy provision required by this rule;

4.4.s. Such other items as are currently required for fixed benefit life insurance policies and are not inconsistent with this rule; and

4.4.t. A provision for nonforfeiture insurance benefits. The insurer may establish a reasonable minimum cash value below which any nonforfeiture insurance options will not be available.

4.5. Policy Loan Provisions. Every variable life insurance policy, other than term insurance policies and pure endowment policies delivered or issued for delivery in this state shall contain provisions which are not less favorable to the policyholder than a provision for policy loans after the policy has been in force for two (2) full years which provides the following:

4.5.a. At least seventy-five percent (75%) of the policy's cash surrender value may be borrowed.

4.5.b. The amount borrowed shall bear interest at a rate not to exceed that permitted by state insurance law.

4.5.c. Any indebtedness shall be deducted from the proceeds payable on death.

4.5.d. Any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any nonforfeiture benefit.

4.5.e. For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within thirty-one (31) days after the date of mailing of 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 the amounts available under the policy to pay the charges, a report must be sent to the policyholder containing the information specified by subdivision c, subsection 9.1 of this rule.

4.5.f. The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase the variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding one hundred ten percent (110 %) of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

4.5.g. The policy may specify a reasonable minimum amount that may be borrowed at any time but the minimum may not apply to any automatic premium loan provision.

4.5.h. No policy loan provision is required if the policy is under extended insurance nonforfeiture option.

4.5.i. The policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.

4.5.j. Amounts paid to the policyholders upon the exercise of any policy loan 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.

4.6. Other Policy Provisions. The following provision may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this state:

4.6.a. An exclusion for suicide within two (2) years of the issue date of the policy; provided, however, that to the extent of the increased death benefits only, the policy may provide an exclusion for suicide within two (2) years of any increase in death benefits which result from an application of the owner subsequent to the policy issue date;

4.6.b. Incidental insurance benefits may be offered on a fixed or variable basis;

4.6.c. Policies issued on a participating basis shall offer to pay dividend amounts in cash. In addition, such policies may offer the following dividend options:

4.6.c.1. The amount of the dividend may be credited against premium payments;

4.6.c.2. The amount of the dividend may be applied to provide amounts of additional fixed or variable benefit life insurance;

4.6.c.3. The amount of the dividend may be deposited in the general account at a specified minimum rate of interest;

4.6.c.4. The amount of the dividend may be applied to provide paid-up amounts of fixed benefit one-year term insurance;

4.6.c.5. The amount of the dividend may be deposited as a variable deposit in a separate account.

4.6.d. A provision allowing the policyholder to elect in writing in the application for the policy or thereafter an automatic premium loan on a basis not less favorable than that required of policy loans under subsection 4.5 of this section, except that a restriction that no more than two (2) consecutive premiums can be paid under this provision may be imposed;

4.6.e. A provision allowing the policyholder to make partial withdrawals; and

4.6.f. Any other policy provision approved by the Commissioner.

W. Va. Code R. § 114-11D-4