Mass. Gen. Laws ch. 175 § 144 1/2

Current through Chapter 223 of the 2024 Legislative Session

Section 175:144 1/2 - Life insurance policies to contain substance provisions

(a) Section 144 shall not apply to policies issued on or after the effective date of this section.

(b) In the case of policies issued on or after the effective date of this section, no policy of life insurance, except as provided in subsection (i), shall be delivered or issued for delivery in the commonwealth unless it contains in substance provisions corresponding to the provisions contained within this subsection, which are, in the opinion of the commissioner, at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified here and are in compliance with subsection (h).

In the event of default in a premium payment, the company will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of an amount as may be hereinafter specified. In lieu of the stipulated paid-up nonforfeiture benefit, the company may substitute, upon proper request not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or longer period of death benefits or, if applicable, a greater amount or earlier payment of endowment benefits.

Upon surrender of the policy not later than 60 days after the due date of a premium payment in default after premiums have been paid for at least 3 years in the case of ordinary insurance or 5 years in the case of industrial insurance, the company will pay, in lieu of a paid-up nonforfeiture benefit, a cash surrender value of an amount as may be hereinafter specified.

A specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make the election elects another available option not later than 60 days after the due date of the premium in default.

If the policy shall have become paid-up by completion of all premium payments or if it is continued under a paid-up nonforfeiture benefit which became effective on or after the third policy anniversary in the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the company will pay, upon surrender of the policy not later than 30 days after a policy anniversary, a cash surrender value of an amount as may be hereinafter specified.

In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums other than a change to a new policy; a statement of the mortality table, interest rate and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy. In the case of all other policies, a statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary either during the first 20 policy years or during the term of the policy, whichever is shorter, such values and benefits to be calculated upon the assumption that there are no dividends or paid-up additions credited to the policy and that there is no indebtedness to the company on the policy.

A statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance law of the state in which the policy is delivered; an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the company on the policy; if a detailed statement of the method of computation of the values and benefits shown in the policy is not stated therein, a statement that a method of computation has been filed with the insurance supervisory official of the state in which the policy is delivered; and a statement of the method to be used in calculating the cash surrender value and a paid-up nonforfeiture benefit available under the policy on a policy anniversary beyond the last anniversary for which values and benefits are consecutively shown in the policy.

Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy.

The company shall reserve the right to defer the payment of a cash surrender value for a period of 6 months after demand therefor with surrender of the policy.

(c)

(1) A cash surrender value available under the policy in the event of default in a premium payment due on a policy anniversary, whether or not required by subsection (b), shall be an amount not less than the excess, if any, of the present value, on the anniversary, of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of:

(i) the then present value of the adjusted premiums as defined in subsection (e), corresponding to premiums which would have fallen due on or after the anniversary; and

(ii) the amount of any indebtedness to the company on the policy.

(2) For a policy issued on or after the operative date of subsection (e), which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value referred to in paragraph (1) shall be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without the rider or supplemental policy provision and the cash surrender value as defined in paragraph (1) for a policy which provides only the benefits otherwise provided by the rider or supplemental policy provision.

(3) For a family policy issued on or after the operative date of subsection (e), which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse reaches the age of 71, the cash surrender value referred to in paragraph (1) shall be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without term insurance on the life of the spouse and the cash surrender value as defined in paragraph (1) for a policy which provides only the benefits otherwise provided by term insurance on the life of the spouse.

(4) A cash surrender value available not later than 30 days after a policy anniversary under a policy paid-up by completion of all premium payments or a policy continued pursuant to a paid-up nonforfeiture benefit, whether or not required by subsection (b), shall be an amount not less than the present value, on the anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the company on the policy.

(d) The present value of a paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due on a policy anniversary shall be, as of that anniversary, at least equal to the cash surrender value then provided for by the policy or, if none is provided for, that cash surrender value which would have been required by this section in the absence of the condition that premiums shall have been paid for at least a specified period.

(e)[Applicable to all policies issued on or after the effective date of this act]

(1) Except as provided in paragraph (7), the adjusted premiums for a policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments or special hazards and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums shall be equal to the sum of:

(i) the then present value of the future guaranteed benefits provided for by the policy;

(ii) 1 per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and

(iii) 125 per cent of the nonforfeiture net level premium as hereinafter defined, provided, however, that in applying this percentage no nonforfeiture net level premium shall be deemed to exceed 4 per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years.

The date of issue of a policy for the purposes of this section shall be the date as of which the rated age of the insured is determined.

(2) The nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of 1 per annum payable on the date of issue of the policy and on each anniversary of the policy on which a premium falls due.

(3) In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums, or which provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values shall initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change.

(4) Except as otherwise provided in paragraph (7), the recalculated future adjusted premiums for a policy shall be a uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards, and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums shall be equal to the excess of the sum of the then present value of the then future guaranteed benefits provided for by the policy and the additional expense allowance, if any, over the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under this policy.

(5) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of:

(i) 1 per cent of the excess, if positive, of the average amount of insurance at the beginning of each of the first 10 policy years subsequent to the change over the average amount of insurance before the change at the beginning of each of the first 10 policy years subsequent to the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and

(ii) 125 per cent of the increase, if positive, in the nonforfeiture net level premium.

(6) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing (A) by (B), where (A) equals the sum of (i) the nonforfeiture net level premium applicable before the change multiplied by the present value of an annuity of 1 per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred and, (ii) the present value of the increase in future guaranteed benefits provided for by the policy, and where (B) equals the present value of an annuity of 1 per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due.

(7) Notwithstanding this section or any other general or special law to the contrary, in the case of a policy issued on a substandard basis which provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which provides higher uniform amount of insurance, adjusted premiums and present values for the substandard policy may be calculated as if it were issued to provide higher uniform amounts of insurance on the standard basis.

(8) All adjusted premiums and present values referred to in this section shall for all policies:

(i) of ordinary insurance be calculated on the basis of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election of the company for specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with 10 year Select Mortality Factors;

(ii) of industrial insurance be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table; and

(iii) issued in a particular calendar year be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate as described in this section, for policies issued in that calendar year.

At the option of the company, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as described in this section, for policies issued in the immediately preceding calendar year.

Under a paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by subsection (b), shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of a paid-up nonforfeiture benefit and paid-up dividend additions.

A company may calculate the amount of a guaranteed paid-up nonforfeiture benefit including paid-up additions under the policy on the basis of an interest rate not lower than that specified in the policy for calculating cash surrender values.

In calculating the present value of paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed shall not be more than those shown in the Commissioners 1980 Extended Term Insurance Table for policies of ordinary insurance or not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance.

For insurance issued on a substandard basis, the calculation of adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables.

For policies issued on or after the effective date of this section, the valuation manual, as defined in section 9 1/2, shall provide the Commissioners Standard Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without 10 year select mortality factors or for the Commissioners 1980 Extended Term Insurance Table. If the commissioner approves by regulation a commissioners standard ordinary mortality table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the effective date of this section then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.

For policies issued on or after the effective date of this section the valuation manual shall provide the Commissioners Standard Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table. If the commissioner approves by regulation a Commissioners Standard Industrial Mortality Table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the effective date of this section then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the valuation manual.

(9) For policies issued on or after the effective date of this section, the nonforfeiture interest rate per annum for a policy issued in a particular calendar year shall be provided by the valuation manual.

(10) Notwithstanding this chapter or any general or special law to the contrary, a refiling of nonforfeiture values or their methods of computation for a previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of other provisions of that policy form.

(f) In the case of a plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurance company based on estimates of future experience, or in the case of a plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in subsection (b), (c), (d) or (e):

(i) the commissioner shall be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by said subsection (b), (c), (d) or (e);

(ii) the commissioner shall be satisfied that the benefits and the pattern of premiums of that plan are not such as to mislead prospective policyholders or insureds; and

(iii) the cash surrender values and paid-up nonforfeiture benefits provided by the plan shall not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this section, as determined by regulations promulgated by the commissioner.

(g) Any cash surrender value and paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in subsections (c), (d) and (e) may be calculated upon the assumption that a death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, shall not be less than the amounts used to provide those additions. Notwithstanding said subsection (c), additional benefits payable:

(i) in the event of death or dismemberment by accident or accidental means;

(ii) in the event of total and permanent disability;

(iii) as reversionary annuity or deferred reversionary annuity benefits;

(iv) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this section would not apply;

(v) as term insurance in the life on a child or on the lives of children provided in a policy on the life of a parent of the child, if that term insurance expires before the child's age is 26, is uniform in amount after the child's age is 1, and has not become paid-up by reason of the death of a parent of the child; and

(vi) as other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits.

(h)

(1) This subsection shall apply to all policies issued on or after the effective date of this section.

(2) Any cash surrender value available under the policy in the event of default in a premium payment due on a policy anniversary shall be in an amount which does not differ by more than .2 per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of the greater of 0 and the basic cash value hereinafter specified and the present value of any existing paid-up additions less the amount of any indebtedness to the company under the policy.

The basic cash value shall be equal to the present value, on the anniversary, of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the company, if there had been no default, less the then present value of the nonforfeiture factors, as described in this section, corresponding to premiums which would have fallen due on or after the anniversary; provided, however, that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in subsection (c), shall be the same as the effects specified in said subsection (c) on the cash surrender values described in this section.

(3) The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as described in subsection (e); provided, however, that no basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as described in subsection (e), were substituted for the nonforfeiture factors in the calculation of the basic cash value. The percentage:

(i) shall be the same percentage for each policy year between the second policy anniversary and the later of either the fifth policy anniversary or the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least .2 per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and

(ii) shall be such that no percentage after the later of the 2 policy anniversaries specified in paragraph (2) may apply to fewer than 5 consecutive policy years.

All adjusted premiums and present values referred to in this subsection shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with this section. The cash surrender values referred to in this section shall include endowment benefits provided for by the policy.

Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of a paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in subsections (b), (c), (d), (e) and (g). The amounts of any cash surrender values and of paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in clauses (i) to (iv), inclusive, of subsection (g) shall conform with the principles of this section.

(i) This section shall not apply to: reinsurance; group insurance; pure endowment; annuity or reversionary annuity contracts; a term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of not more than 20 years expiring before age 71, for which uniform premiums are payable during the entire term of the policy; a term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in subsection (e), is less than the adjusted premium so calculated, on a term policy of uniform amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of 20 years or less expiring before age 71, for which uniform premiums are payable during the entire term of the policy; a policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of a paid-up nonforfeiture benefit, at the beginning of a policy year, calculated as specified in subsections (c), (d) and (e), exceeds 2 1/2 per cent of the amount of insurance at the beginning of the same policy year; or a policy which shall be delivered outside the commonwealth through an agent or other representative of the company issuing the policy.

For purposes of determining the applicability of this section, the age at expiration for a joint term life insurance policy shall be the age at expiration of the oldest life.

(j) The commissioner may, pursuant to chapter 30A, upon notice and opportunity for all interested parties to be heard, promulgate rules, regulations and orders as shall be necessary for the implementation and administration of this section.

Mass. Gen. Laws ch. 175, § 144 1/2

Added by Acts 2018, c. 367,§ 3, eff. 1/1/2018.