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Illinois Compiled Statutes
Information maintained by the Legislative Reference Bureau Updating the database of the Illinois Compiled Statutes (ILCS) is an ongoing process. Recent laws may not yet be included in the ILCS database, but they are found on this site as Public Acts soon after they become law. For information concerning the relationship between statutes and Public Acts, refer to the Guide. Because the statute database is maintained primarily for legislative drafting purposes, statutory changes are sometimes included in the statute database before they take effect. If the source note at the end of a Section of the statutes includes a Public Act that has not yet taken effect, the version of the law that is currently in effect may have already been removed from the database and you should refer to that Public Act to see the changes made to the current law.
() 215 ILCS 5/210
(215 ILCS 5/210) (from Ch. 73, par. 822)
Sec. 210. Distribution of assets; priorities; unpaid dividends.
(1) Any time after the last day fixed for the filing of
proofs of claims in the liquidation of a company, the court may, upon the
application of the Director authorize him to declare out of the funds
remaining in his hands, one or more dividends upon all claims allowed in
accordance with the priorities established in Section 205.
(2) Where there has been no adjudication of insolvency, the Director
shall pay all allowed claims in full in accordance with the priorities set
forth in Section 205. The director shall not be chargeable for any
assets so distributed to any claimant who has failed to file a proper proof
of claim before such distribution has been made.
(3) When subsequent to an adjudication of insolvency, pursuant to Section
208, a surplus is found to exist after the payment in full of all allowed
claims falling within the priorities set forth in paragraphs (a), (b), (c),
(d),
(e), (f) and (g) of subsection (1) of Section 205 and which have been duly
filed prior to the last date fixed for the filing thereof, and after the
setting aside of a reserve for all additional costs and expenses of the
proceeding, the court shall set a new date for the filing of claims. After the
expiration of the new date, all allowed claims filed on or before said new date
together with all previously allowed claims falling within the priorities set
forth in paragraphs (h) and (i) of subsection (1) of Section 205 shall be paid
in accordance with the priorities set forth in Section 205.
(4) Dividends remaining unclaimed or unpaid in the hands of the
Director for 6 months after the final order of distribution may be
by him deposited in one or more savings and loan associations, State or
national banks, trust companies or savings banks to the credit of the Director,
whomsoever he may be, in trust for the person entitled thereto, but no such
person shall be entitled to any interest upon such deposit. All such deposits
shall be entitled to priority of payment in case of the insolvency or voluntary
or involuntary liquidation of the depositary on an equality with any other
priority given by the banking law. Any such funds together with interest, if
any, paid or credited thereon, remaining and unclaimed in the hands of the
Director in Trust after 2 years shall be presumed abandoned and reported and
delivered to the State Treasurer and become subject to the provisions of the Revised
Uniform Unclaimed Property Act.
(Source: P.A. 100-22, eff. 1-1-18 .)
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215 ILCS 5/211.1
(215 ILCS 5/211.1)
Sec. 211.1.
Termination of proceedings.
(a) When all assets justifying the
expense of collection and distribution have been marshaled and distributed
under this Code, the Director as liquidator shall petition the court to
terminate the liquidation proceedings and to close the estate. The court may
grant such other relief as may be appropriate, including a full discharge of
all
liability and responsibility of the
liquidator, a reservation of assets for administrative expenses incurred in the
closing of the estate, and the maintenance and destruction of records.
(b) Subject to the approval of the court, after the completion of all
postclosure activities for which moneys
were reserved, the Director is authorized to destroy company records and
documents notwithstanding any other applicable statutes and any remaining
reserved
assets that are provided for in subsection (a) and that may not be practicably
or
economically distributed to claimants shall be deposited into a segregated
account
to be known as the Closed Estate Fund Trust Account.
The Director may use moneys held in the account for paying the administrative
expenses of companies
subject
to this Article that lack sufficient assets to allow the Director to perform
his duties and obligations under this Article. An annual audit of
the Closed Estate Fund Trust Account shall be performed in accordance with
Section 200 of this Code regardless of its balance.
(c) The Director may petition the court to reopen the proceedings for
good cause shown, including the marshaling of additional assets, and the court
may enter such other orders as may be deemed appropriate.
(Source: P.A. 88-297; 89-206, eff. 7-21-95.)
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215 ILCS 5/212.1
(215 ILCS 5/212.1)
Sec. 212.1.
Subpoena and document production.
The court shall have
jurisdiction, upon, or at any time after the filing of the complaint, upon the
petition of the
Director to subpoena witnesses and
compel their attendance, administer oaths, examine any person under oath and
compel any person to subscribe to his or her testimony after it has been
correctly reduced to writing, and to require the production of any books,
papers, records, or other documents.
(Source: P.A. 88-297.)
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215 ILCS 5/213.5
(215 ILCS 5/213.5)
Sec. 213.5.
Severability.
The provisions of this Article are severable
under Section 1.31 of the Statute on Statutes.
(Source: P.A. 89-206, eff. 7-21-95.)
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215 ILCS 5/221
(215 ILCS 5/221) (from Ch. 73, par. 833)
Sec. 221.
Continuation of existing proceedings.
Every proceeding heretofore commenced under "An Act in relation to
delinquent insurance companies, associations and societies," approved June
26, 1925, as from time to time amended, which is repealed by this Code
shall be continued as if said Act had not been repealed, but assessments
against members or subscribers of any company which has issued assessable
policies or contracts of insurance may be made in accordance with Section
193.
(Source: P.A. 83-333.)
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215 ILCS 5/Art. XIII.5
(215 ILCS 5/Art. XIII.5 heading)
ARTICLE XIII 1/2.
UNIFORM PROVISIONS FOR LIQUIDATION
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215 ILCS 5/221.1
(215 ILCS 5/221.1) (from Ch. 73, par. 833.1)
Sec. 221.1.
Definitions.
For the purposes of Sections 221.1 to 221.10, both inclusive, the
following terms have the following meanings;
(1) "Reciprocal State" means a state wherein:
(a) it is provided by law that the insurance supervisory or other
administrative agency of the state shall conduct or wind up the affairs of
delinquent companies under judicial supervision and shall be vested with
title to all of the assets of any domestic company against which a
delinquency proceeding has been commenced, and
(b) in substance and effect the provisions of Sections 221.1 to 221.10,
both inclusive are in force.
(2) "Insurer" means any person, firm, corporation, association, or
aggregation of persons doing or proposing to do an insurance business and
subject to the insurance supervisory authority of, or to liquidation,
rehabilitation, reorganization or conservation by, the commissioner of
insurance or equivalent insurance supervisory official of the state.
(3) "Delinquency proceeding" means any proceeding commenced against an
insurer for the purpose of liquidating, rehabilitating, reorganizing or
conserving such insurer.
(4) "Domiciliary state" means the state in which an insurer is
incorporated or organized or, in the case of an insurer incorporated or
organized in a foreign country, the state in which such insurer, having
become authorized to do business in such state has, at the commencement of
delinquency proceedings the largest amount of its trusteed assets and
deposits for the benefit of its policy holder or policy holders and
creditors in the United States; and "domiciliary insurer" means an insurer
in its domiciliary state.
(5) "Ancillary state" means any state other than a domiciliary state.
(6) "General Assets" means all property, real or personal, not
specifically mortgaged, pledged, deposited as security or otherwise
encumbered, and as to such specifically encumbered property the term
includes all in excess of the amount necessary to discharge the sum or sums
secured.
(7) "Preferred claim" means any claim with respect to which the law of a
state or of the United States accords priority of payment from the general
assets of the insurer.
(8) "Special deposit claim" means any claims secured generally by a
deposit of a fund or property or bond which deposit has been made to secure
the payment of all claims of a particular description or all claims of
persons resident in a particular state. The term does not include claims
which are secured by deposit for the benefit or protection of all claimants
against the insurer in the United States.
(9) "Secured claim" means any claim secured individually by mortgage,
trust, deed, pledge, deposit as security, escrow or otherwise. The term
also includes claims which prior to the commencement of delinquency
proceedings in the state of the insurer's domicile have become liens upon
specific assets by reason of judicial process.
(10) "State" means any state or territory of the United States, and the
District of Columbia.
(11) "Foreign country" means territory outside of any state, as defined.
(12) "Receiver" means receiver, liquidator, rehabilitator or conservator
as the context may require.
In addition to and notwithstanding any other provisions of law, this
Article shall apply to the administration by the Director of the affairs of
delinquent domestic companies with respect to matters affecting or related
to reciprocal states, and shall also apply to matters affecting or related
to this State in the administration by the Director of the affairs of
delinquent companies domiciled in reciprocal states and authorized to
transact business in this State.
(Source: Laws 1941, vol. 1, p. 832 .)
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215 ILCS 5/221.2
(215 ILCS 5/221.2) (from Ch. 73, par. 833.2)
Sec. 221.2.
Ancillary delinquency proceedings.
After the commencement of delinquency proceedings in a reciprocal state
against an insurer domiciliary in such state, a court of competent
jurisdiction in this State shall on the petition of the Director of
Insurance
of this State appoint such Director of Insurance as ancillary receiver in
this State of such insurer. The Director of Insurance shall file such
petition (a) if he finds that there are sufficient assets of such insurer
located in this State to justify the appointment of an ancillary receiver
or (b) if 10 or more persons resident in a state having claims
against
such insurer file a petition or petitions in writing with the Director
requesting the appointment of such ancillary receiver. As ancillary
receiver the Director shall have the right to sue for and reduce to
possession the assets of such insurer in this State, and, subject to the
rights of the domiciliary receiver, he shall have the same powers and be
subject to the same duties with respect to such assets, as are possessed by
a receiver of a domiciliary insurer under the laws of this State. The
domiciliary receiver of an insurer domiciled in a reciprocal state shall,
except as to special deposits and security on secured claims pursuant to
Section 221.7, be vested by operation of law with the title to all of the
assets, property, contracts, agents' balances, and all of the books, accounts
and other records of the insurer located in this State; and shall have the
immediate right to recover balances due from resident agents and to obtain
possession of any books and records of the insurer found in this State.
(Source: P.A. 89-206, eff. 7-21-95.)
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215 ILCS 5/221.3
(215 ILCS 5/221.3) (from Ch. 73, par. 833.3)
Sec. 221.3.
Filing and proving of claims of non-residents against delinquent domiciliary
insurers.
In any delinquency proceeding begun in this state against a domiciliary
insurer of this state, claimants residing in a reciprocal ancillary state
may file claims either with the ancillary receiver, if any, or with the
domiciliary receiver. All such claims must be filed on or before the last
date fixed for the filing of claims in the domiciliary delinquency
proceedings.
In any such proceeding controverted claims belonging to claimants
residing in ancillary states may either (a) be proved in this state as
provided by law, or (b) if ancillary proceedings have been commenced in
such ancillary state, may be proved in such ancillary proceedings. In the
event a claimant elects to prove his claim in ancillary proceedings, and,
if notice of the claim and opportunity to appear and be heard is afforded
the domiciliary receiver of this state, such claim, when allowed by the
court in the ancillary state, shall be accepted in this state as final and
conclusive as to its amount, and shall also be accepted as final and
conclusive as to its priority, if any, as against special deposits or other
security located within the ancillary state.
(Source: Laws 1941, vol. 1, p. 832.)
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215 ILCS 5/221.4
(215 ILCS 5/221.4) (from Ch. 73, par. 833.4)
Sec. 221.4.
Proof of
claims of residents in connection with delinquency proceedings in other
states.
If a delinquency proceeding is commenced in a reciprocal state against
an insurer domiciliary in such state, claimants against such insurer who
reside within this State may file claims either with the ancillary
receiver, if any, appointed in this State or with the domiciliary receiver.
All such claims must be filed on or before the last date fixed for the
filing of claims in the domiciliary delinquency proceeding.
In any such proceeding controverted claims belonging to claimants
residing in this State may either (a) be proved in the domiciliary state as
provided by the law of such state, or (b) if ancillary proceedings have
been commenced in this State, be proved in such ancillary proceedings. In
the event that any such claimant elects to prove his claim in this State,
he shall file his claim with the ancillary receiver in the manner provided
by the law of this State for the proving of claims against domiciliary
insurers, and he shall give, or cause to be given, at least 40 days prior to
the date of hearing, notice to the receiver
in the domiciliary state, either by mail or otherwise in writing that such
claim is being made to such ancillary receiver and the nature and the
amount thereof. The domiciliary receiver shall be entitled to appear or to
be represented in any proceeding in this State involving the adjudication
of the claim. The allowance of the claim by the courts of this State shall
be final and conclusive both as to its amount and also as to its priority,
if any, against special deposits or other security located within this
State.
(Source: P.A. 89-206, eff. 7-21-95.)
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215 ILCS 5/221.5
(215 ILCS 5/221.5) (from Ch. 73, par. 833.5)
Sec. 221.5.
Priority of preferred claims.
In any delinquency proceeding against a domiciliary insurer of this
state, claims owing to residents of ancillary reciprocal states shall be
deemed preferred claims if, and only if, like claims are preferred under
the laws of this state. All such claims whether owing to residents or
non-residents shall be given equal priority of payment from general assets.
No law of an ancillary state providing for preferred claims against the
general assets of insurers shall be recognized as against the assets of
delinquent domiciliary insurers of this state regardless of where such
assets may be located.
In any delinquency proceeding against an insurer domiciliary in a
reciprocal state, claims owing to residents of this state shall be
preferred if, and only if, like claims are preferred by the laws of such
other state.
(Source: Laws 1941, vol. 1, p. 832 .)
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215 ILCS 5/221.6
(215 ILCS 5/221.6) (from Ch. 73, par. 833.6)
Sec. 221.6.
Priority of special deposit claims.
The owners of special deposit claims against an insurer for which a
receiver has been appointed in a delinquency proceeding in this or any
reciprocal state shall be given priority against their several special
deposits in accordance with the provisions of the statutes requiring the
creation and maintenance of such special deposits. If there be a deficiency
in any such special deposit so that the claims secured thereby are not
fully discharged therefrom, the claimants may share in the general assets,
but such sharing shall be deferred until general creditors, and also
claimants against other special deposits who have received a small
percentage from their respective special deposits, have been paid
percentages of their claims equal to the percentage paid from such special
deposit, it being the purpose and intent of this provision to equalize to
this extent the advantage gained by the security provided by such special
deposits.
(Source: Laws 1941, vol. 1, p. 832 .)
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215 ILCS 5/221.7
(215 ILCS 5/221.7) (from Ch. 73, par. 833.7)
Sec. 221.7.
Priority
of secured claims.
The owner of a secured claim against an insurer for which a receiver has
been appointed in a delinquency proceeding in this or any reciprocal state
may surrender his security and file his claim as a general creditor, or
such secured claim may be discharged by resort to the security, in which
case the deficiency, if any, shall be treated as a claim against the
general assets of the insurer on the same basis as claims of unsecured
creditors. If the amount of the deficiency has been adjudicated in ancillary
proceedings as provided in this Article, that amount shall be conclusive;
otherwise the amount of such deficiency shall be ascertained and determined in
the delinquency proceeding in the domiciliary state of such insurer.
(Source: P.A. 89-206, eff. 7-21-95.)
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215 ILCS 5/221.8
(215 ILCS 5/221.8) (from Ch. 73, par. 833.8)
Sec. 221.8.
Right of
domiciliary receiver to residium of assets of insurers domiciled in
ancillary states.
The ancillary receiver of assets in this State of insurers domiciliary
in reciprocal states and subject to delinquency proceedings therein shall,
as soon as practicable, arrange the liquidation or other disposition of
special deposit claims and secured claims proved in the ancillary
proceedings in this State, and all remaining assets, after payment of
expenses he shall promptly transfer to the domiciliary receiver.
The domiciliary receiver of a reciprocal state may sue the ancillary
receiver of this State in the courts of this State for the purpose of
collecting or obtaining any assets of the insurer to which he or she may be
entitled under the laws of this State,
and, if no
ancillary receiver be appointed in this State, such domiciliary receiver
may collect or reduce to possession, in this State, and may sue in the
courts of this State to obtain, any assets of such delinquent insurer
located in this State, to which he or she may be entitled under the laws of
this State.
(Source: P.A. 89-206, eff. 7-21-95.)
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215 ILCS 5/221.9
(215 ILCS 5/221.9) (from Ch. 73, par. 833.9)
Sec. 221.9.
Attachment and garnishment of assets.
In the event of the commencement of delinquency proceedings in any
reciprocal state no action or proceeding in the nature of an attachment,
garnishment, execution or otherwise, shall be commenced in the courts of
this state against such delinquent insurer or its assets.
(Source: Laws 1941, vol. 1, p. 832 .)
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215 ILCS 5/221.10
(215 ILCS 5/221.10) (from Ch. 73, par. 833.10)
Sec. 221.10.
Declaration of purpose.
The purpose of Sections 221.1 to 221.10, both inclusive is to promote
uniformity in the liquidation, rehabilitation, reorganization or
conservation of insurers doing business in more than one state. It is
intended that Sections 221.1 to 221.10, both inclusive shall be liberally
construed to the end that so far as possible the assets of such insurers
shall be equally and uniformly conserved in all states, and that claimants
against such insurers shall receive equal and uniform treatment
irrespective of residence or the place of the acts or contracts upon which
their claims are based. The provisions of Sections 221.1 to 221.10, both
inclusive shall be effective only with respect to this state and other
states in which (a) it is provided by law that only the Insurance
Commissioner or equivalent supervisory official of the State shall be
vested with title to the assets of, and shall wind up the affairs of,
delinquent insurers under judicial supervision; and (b) in substance and
effect the provisions of Sections 221.1 to 221.10, both inclusive, are in
force. The provisions of Sections 221.1 to 221.10, both inclusive, insofar
as applicable to any insurer incorporated or organized in a foreign
country, shall apply only to the assets, liabilities and business of such
insurer within the several states.
(Source: Laws 1941, vol. 1, p. 832 .)
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215 ILCS 5/221.11
(215 ILCS 5/221.11) (from Ch. 73, par. 833.11)
Sec. 221.11.
Proceedings governed by Civil Practice Law and
Supreme Court Rules.)
The rules of practice, the course and method of procedure in circuit
courts as established by the Civil Practice Law and Supreme
Court Rules and any
amendments thereto are adopted for the purposes of this Article except
where other procedures or rules are in this Article expressly provided.
Appeals may be taken as in other civil cases.
(Source: P.A. 82-783.)
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215 ILCS 5/221.12
(215 ILCS 5/221.12) (from Ch. 73, par. 833.12)
Sec. 221.12.
Sections 211, 212, 213, 214, 215, 216, 217, 218, 219 and 220, each inclusive, are repealed; provided, however, that every proceeding
heretofore commenced under such sections shall be continued as though such
sections had not been repealed.
(Source: Laws 1941, vol. 1, p. 832.)
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215 ILCS 5/221.13
(215 ILCS 5/221.13) (from Ch. 73, par. 833.13)
Sec. 221.13.
Uniformity of interpretation.
Sections 221.1 to 221.12 each inclusive, of this Article shall be so
interpreted and construed as to effectuate their general purpose to make
uniform the law of those states that enact the Uniform Reciprocal
Liquidation Act.
(Source: Laws 1941, vol. 1, p. 832 .)
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215 ILCS 5/Art. XIV
(215 ILCS 5/Art. XIV heading)
ARTICLE XIV.
LEGAL RESERVE LIFE INSURANCE
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215 ILCS 5/222
(215 ILCS 5/222) (from Ch. 73, par. 834)
Sec. 222.
Scope of
article.
This article shall apply to all stock and mutual legal reserve life
companies, and to the extent provided in section 281 to assessment legal
reserve life companies, authorized to transact in this State the kind or
kinds of business described in Class 1 of section 4.
(Source: Laws 1937, p. 696.)
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215 ILCS 5/223
(215 ILCS 5/223) (from Ch. 73, par. 835)
Sec. 223. Director to value policies - Legal standard of valuation.
(1) For policies and contracts issued prior to the operative date of the Valuation Manual, the Director shall annually value, or cause to be valued, the
reserve liabilities (hereinafter called reserves) for all outstanding
life insurance policies and annuity and pure endowment contracts of
every life insurance company doing business in this State, except that
in the case of an alien company, such valuation shall be limited to its
United States business. In calculating such reserves, he may use group methods
and approximate averages for fractions of a year or otherwise. In lieu
of the valuation of the reserves herein required of any foreign or alien
company, he may accept any valuation made, or caused to be made, by the
insurance supervisory official of any state or other jurisdiction when
such valuation complies with the minimum standard provided in this Section. The provisions set forth in this subsection (1) and in subsections (2), (3), (4), (5), (6), and (7) of this Section shall apply to all policies and contracts, as appropriate, subject to this Section issued prior to the operative date of the Valuation Manual. The provisions set forth in subsections (8) and (9) of this Section shall not apply to any such policies and contracts. For policies and contracts issued on or after the operative date of the Valuation Manual, the Director shall annually value, or cause to be valued, the reserve liabilities (reserves) for all outstanding life insurance contracts, annuity and pure endowment contracts, accident and health contracts, and deposit-type contracts of every company issued on or after the operative date of the Valuation Manual. In lieu of the valuation of the reserves required of a foreign or alien company, the Director may accept a valuation made, or caused to be made, by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this Section. The provisions set forth in subsections (8) and (9) of this Section shall apply to all policies and contracts issued on or after the operative date of the Valuation Manual.
Any such company which adopts at any time a standard of
valuation producing greater aggregate reserves than those calculated
according to the minimum standard provided under this Section may adopt a lower standard of valuation, with the approval
of the Director, but not lower
than the minimum herein provided, however, that, for the purposes of this
subsection, the holding of additional reserves previously determined by the appointed actuary to be necessary to render the opinion required by
subsection (1a) shall not be deemed to be the adoption of a higher standard
of valuation. In the valuation of policies the
Director shall give no consideration to, nor make any deduction because
of, the existence or the possession by the company of
(a) policy liens created by any agreement given or | | assented to by any assured subsequent to July 1, 1937, for which liens such assured has not received cash or other consideration equal in value to the amount of such liens, or
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(b) policy liens created by any agreement entered
| | into in violation of Section 232 unless the agreement imposing or creating such liens has been approved by a Court in a proceeding under Article XIII, or in the case of a foreign or alien company has been approved by a court in a rehabilitation or liquidation proceeding or by the insurance official of its domiciliary state or country, in accordance with the laws thereof.
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(1a) This subsection shall become operative at the end of the first
full calendar year following the effective date of this amendatory Act of 1991.
(A) General.
(1) Prior to the operative date of the Valuation
| | Manual, every life insurance company doing business in this State shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Director by regulation are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts and comply with applicable laws of this State. The Director by regulation shall define the specifics of this opinion and add any other items deemed to be necessary to its scope.
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(2) The opinion shall be submitted with the
| | annual statement reflecting the valuation of reserve liabilities for each year ending on or after December 31, 1992.
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(3) The opinion shall apply to all business in
| | force including individual and group health insurance plans, in form and substance acceptable to the Director as specified by regulation.
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(4) The opinion shall be based on standards
| | adopted from time to time by the Actuarial Standards Board and on additional standards as the Director may by regulation prescribe.
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(5) In the case of an opinion required to be
| | submitted by a foreign or alien company, the Director may accept the opinion filed by that company with the insurance supervisory official of another state if the Director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State.
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(6) For the purpose of this Section, "qualified
| | actuary" means a member in good standing of the American Academy of Actuaries who meets the requirements set forth in its regulations.
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(7) Except in cases of fraud or willful
| | misconduct, the qualified actuary shall not be liable for damages to any person (other than the insurance company and the Director) for any act, error, omission, decision or conduct with respect to the actuary's opinion.
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(8) Disciplinary action by the Director against
| | the company or the qualified actuary shall be defined in regulations by the Director.
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(9) A memorandum, in form and substance
| | acceptable to the Director as specified by regulation, shall be prepared to support each actuarial opinion.
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(10) If the insurance company fails to provide a
| | supporting memorandum at the request of the Director within a period specified by regulation or the Director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the regulations or is otherwise unacceptable to the Director, the Director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum as is required by the Director.
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(11) Any memorandum in support of the opinion,
| | and any other material provided by the company to the Director in connection therewith, shall be kept confidential by the Director and shall not be made public and shall not be subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this Section or by regulations promulgated hereunder; provided, however, that the memorandum or other material may otherwise be released by the Director (a) with the written consent of the company or (b) to the American Academy of Actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the Director for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is cited by the company in its marketing or is cited before any governmental agency other than a state insurance department or is released by the company to the news media, all portions of the confidential memorandum shall be no longer confidential.
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(B) Actuarial analysis of reserves and assets
| | supporting those reserves.
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(1) Every life insurance company, except as
| | exempted by or under regulation, shall also annually include in the opinion required by paragraph (A)(1) of this subsection (1a), an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the Director by regulation, when considered in light of the assets held by the company with respect to the reserves and related actuarial items including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts including, but not limited to, the benefits under and expenses associated with the policies and contracts.
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(2) The Director may provide by regulation for a
| | transition period for establishing any higher reserves which the qualified actuary may deem necessary in order to render the opinion required by this Section.
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(1b) Actuarial Opinion of Reserves after the Operative Date of the Valuation Manual.
(A) General.
(1) Every company with outstanding life insurance
| | contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the Director shall annually submit the opinion of the appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this State. The Valuation Manual shall prescribe the specifics of this opinion, including any items deemed to be necessary to its scope.
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| (2) The opinion shall be submitted with the
| | annual statement reflecting the valuation of such reserve liabilities for each year ending on or after the operative date of the Valuation Manual.
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| (3) The opinion shall apply to all policies and
| | contracts subject to paragraph (B) of this subsection (1b), plus other actuarial liabilities as may be specified in the Valuation Manual.
|
| (4) The opinion shall be based on standards
| | adopted from time to time by the Actuarial Standards Board or its successor and on additional standards as may be prescribed in the Valuation Manual.
|
| (5) In the case of an opinion required to be
| | submitted by a foreign or alien company, the Director may accept the opinion filed by that company with the insurance supervisory official of another state if the Director determines that the opinion reasonably meets the requirements applicable to a company domiciled in this State.
|
| (6) Except in cases of fraud or willful
| | misconduct, the appointed actuary shall not be liable for damages to any person (other than the insurance company and the Director) for any act, error, omission, decision, or conduct with respect to the appointed actuary's opinion.
|
| (7) Disciplinary action by the Director against
| | the company or the appointed actuary shall be defined by the Director by rule.
|
| (8) A memorandum, in a form and substance as
| | specified in the Valuation Manual and acceptable to the Director, shall be prepared to support each actuarial opinion.
|
| (9) If the insurance company fails to provide a
| | supporting memorandum at the request of the Director within a period specified in the Valuation Manual or the Director determines that the supporting memorandum provided by the insurance company fails to meet the standards prescribed by the Valuation Manual or is otherwise unacceptable to the Director, the Director may engage a qualified actuary at the expense of the company to review the opinion and the basis for the opinion and prepare the supporting memorandum as is required by the Director.
|
| (B) Every company with outstanding life insurance
| | contracts, accident and health insurance contracts, or deposit-type contracts in this State and subject to regulation by the Director, except as exempted in the Valuation Manual, shall also annually include in the opinion required by subparagraph (1) of paragraph (A) of this subsection (1b), an opinion of the same appointed actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified in the Valuation Manual, when considered in light of the assets held by the company with respect to the reserves and related actuarial items, including, but not limited to, the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the company's obligations under the policies and contracts, including, but not limited to, the benefits under and expenses associated with the policies and contracts.
|
| (2) This subsection shall apply to only those policies and contracts
issued prior to the operative date of Section 229.2 (the Standard
Non-forfeiture Law).
(a) Except as otherwise in this Article provided, the
| | legal minimum standard for valuation of contracts issued before January 1, 1908, shall be the Actuaries or Combined Experience Table of Mortality with interest at 4% per annum and for valuation of contracts issued on or after that date shall be the American Experience Table of Mortality with either Craig's or Buttolph's Extension for ages under 10 and with interest at 3 1/2% per annum. The legal minimum standard for the valuation of group insurance policies under which premium rates are not guaranteed for a period in excess of 5 years shall be the American Men Ultimate Table of Mortality with interest at 3 1/2% per annum. Any life company may, at its option, value its insurance contracts issued on or after January 1, 1938, in accordance with their terms on the basis of the American Men Ultimate Table of Mortality with interest not higher than 3 1/2% per annum.
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|
(b) Policies issued prior to January 1, 1908, may
| | continue to be valued according to a method producing reserves not less than those produced by the full preliminary term method. Policies issued on and after January 1, 1908, may be valued according to a method producing reserves not less than those produced by the modified preliminary term method hereinafter described in paragraph (c). Policies issued on and after January 1, 1938, may be valued either according to a method producing reserves not less than those produced by such modified preliminary term method or by the select and ultimate method on the basis that the rate of mortality during the first 5 years after the issuance of such contracts respectively shall be calculated according to the following percentages of rates shown by the American Experience Table of Mortality:
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|
(i) first insurance year 50% thereof;
(ii) second insurance year 65% thereof;
(iii) third insurance year 75% thereof;
(iv) fourth insurance year 85% thereof;
(v) fifth insurance year 95% thereof.
(c) If the premium charged for the first policy year
| | under a limited payment life preliminary term policy providing for the payment of all premiums thereon in less than 20 years from the date of the policy or under an endowment preliminary term policy, exceeds that charged for the first policy year under 20 payment life preliminary term policies of the same company, the reserve thereon at the end of any year, including the first, shall not be less than the reserve on a 20 payment life preliminary term policy issued in the same year at the same age, together with an amount which shall be equivalent to the accumulation of a net level premium sufficient to provide for a pure endowment at the end of the premium payment period, equal to the difference between the value at the end of such period of such a 20 payment life preliminary term policy and the full net level premium reserve at such time of such a limited payment life or endowment policy. The premium payment period is the period during which premiums are concurrently payable under such 20 payment life preliminary term policy and such limited payment life or endowment policy.
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|
(d) The legal minimum standard for the valuations of
| | annuities issued on and after January 1, 1938, shall be the American Annuitant's Table with interest not higher than 3 3/4% per annum, and all annuities issued before that date shall be valued on a basis not lower than that used for the annual statement of the year 1937; but annuities deferred 10 or more years and written in connection with life insurance shall be valued on the same basis as that used in computing the consideration or premiums therefor, or upon any higher standard at the option of the company.
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(e) The Director may vary the standards of interest
| | and mortality as to contracts issued in countries other than the United States and may vary standards of mortality in particular cases of invalid lives and other extra hazards.
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|
(f) The legal minimum standard for valuation of
| | waiver of premium disability benefits or waiver of premium and income disability benefits issued on and after January 1, 1938, shall be the Class (3) Disability Table (1926) modified to conform to the contractual waiting period, with interest at not more than 3 1/2% per annum; but in no event shall the values be less than those produced by the basis used in computing premiums for such benefits. The legal minimum standard for the valuation of such benefits issued prior to January 1, 1938, shall be such as to place an adequate value, as determined by sound insurance practices, on the liabilities thereunder and shall be such that the value of the benefits under each and every policy shall in no case be less than the value placed upon the future premiums.
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|
(g) The legal minimum standard for the valuation of
| | industrial policies issued on or after January 1, 1938, shall be the American Experience Table of Mortality or the Standard Industrial Mortality Table or the Substandard Industrial Mortality Table with interest at 3 1/2% per annum by the net level premium method, or in accordance with their terms by the modified preliminary term method hereinabove described.
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(h) Reserves for all such policies and contracts may
| | be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for all such policies and contracts than the minimum reserves required by this subsection.
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(3) This subsection shall apply to only those policies and contracts
issued on or after January 1, 1948 or such earlier operative date of
Section 229.2 (the Standard Non-forfeiture Law) as shall have been
elected by the insurance company issuing such policies or contracts.
(a) Except as otherwise provided in subsections (4),
| | (6), and (7), the minimum standard for the valuation of all such policies and contracts shall be the Commissioners Reserve valuation method defined in paragraphs (b) and (f) of this subsection and in subsection 5, 3 1/2% interest for such policies issued prior to September 8, 1977, 5 1/2% interest for single premium life insurance policies and 4 1/2% interest for all other such policies issued on or after September 8, 1977, and the following tables:
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|
(i) The Commissioners 1941 Standard Ordinary
| | Mortality Table for all Ordinary policies of life insurance issued on the standard basis, excluding any disability and accidental death benefits in such policies, for such policies issued prior to the operative date of subsection (4a) of Section 229.2 (Standard Non-forfeiture Law); and the Commissioners 1958 Standard Ordinary Mortality Table for such policies issued on or after such operative date but prior to the operative date of subsection (4c) of Section 229.2 provided that for any category of such policies issued on female risks all modified net premiums and present values referred to in this Section may, prior to September 8, 1977, be calculated according to an age not more than 3 years younger than the actual age of the insured and, after September 8, 1977, calculated according to an age not more than 6 years younger than the actual age of the insured; and for such policies issued on or after the operative date of subsection (4c) of Section 229.2, (i) the Commissioners 1980 Standard Ordinary Mortality Table, or (ii) at the election of the company for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors, or (iii) any ordinary mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies.
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|
(ii) For all Industrial Life Insurance policies
| | issued on the standard basis, excluding any disability and accidental death benefits in such policies--the 1941 Standard Industrial Mortality Table for such policies issued prior to the operative date of subsection 4 (b) of Section 229.2 (Standard Non-forfeiture Law); and for such policies issued on or after such operative date the Commissioners 1961 Standard Industrial Mortality Table or any industrial mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies.
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|
(iii) For Individual Annuity and Pure Endowment
| | contracts, excluding any disability and accidental death benefits in such policies--the 1937 Standard Annuity Mortality Table--or, at the option of the company, the Annuity Mortality Table for 1949, Ultimate, or any modification of either of these tables approved by the Director.
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|
(iv) For Group Annuity and Pure Endowment
| | contracts, excluding any disability and accidental death benefits in such policies--the Group Annuity Mortality Table for 1951, any modification of such table approved by the Director, or, at the option of the company, any of the tables or modifications of tables specified for Individual Annuity and Pure Endowment contracts.
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|
(v) For Total and Permanent Disability Benefits
| | in or supplementary to Ordinary policies or contracts for policies or contracts issued on or after January 1, 1966, the tables of Period 2 disablement rates and the 1930 to 1950 termination rates of the 1952 Disability Study of the Society of Actuaries, with due regard to the type of benefit, or any tables of disablement rates and termination rates adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies; for policies or contracts issued on or after January 1, 1961, and prior to January 1, 1966, either such tables or, at the option of the company, the Class (3) Disability Table (1926); and for policies issued prior to January 1, 1961, the Class (3) Disability Table (1926). Any such table shall, for active lives, be combined with a mortality table permitted for calculating the reserves for life insurance policies.
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(vi) For Accidental Death benefits in or
| | supplementary to policies--for policies issued on or after January 1, 1966, the 1959 Accidental Death Benefits Table or any accidental death benefits table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such policies; for policies issued on or after January 1, 1961, and prior to January 1, 1966, any of such tables or, at the option of the company, the Inter-Company Double Indemnity Mortality Table; and for policies issued prior to January 1, 1961, the Inter-Company Double Indemnity Mortality Table. Either table shall be combined with a mortality table permitted for calculating the reserves for life insurance policies.
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(vii) For Group Life Insurance, life insurance
| | issued on the substandard basis and other special benefits--such tables as may be approved by the Director.
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|
(b) Except as otherwise provided in paragraph (f) of
| | subsection (3), subsection (5), and subsection (7) reserves according to the Commissioners reserve valuation method, for the life insurance and endowment benefits of policies providing for a uniform amount of insurance and requiring the payment of uniform premiums shall be the excess, if any, of the present value, at the date of valuation, of such future guaranteed benefits provided for by such policies, over the then present value of any future modified net premiums therefor. The modified net premiums for any such policy shall be such uniform percentage of the respective contract premiums for such benefits that the present value, at the date of issue of the policy, of all such modified net premiums shall be equal to the sum of the then present value of such benefits provided for by the policy and the excess of (A) over (B), as follows:
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|
(A) A net level annual premium equal to the
| | present value, at the date of issue, of such benefits provided for after the first policy year, divided by the present value, at the date of issue, of an annuity of one per annum payable on the first and each subsequent anniversary of such policy on which a premium falls due; provided, however, that such net level annual premium shall not exceed the net level annual premium on the 19 year premium whole life plan for insurance of the same amount at an age one year higher than the age at issue of such policy.
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(B) A net one year term premium for such benefits
| | provided for in the first policy year.
|
|
For any life insurance policy issued on or after
| | January 1, 1987, for which the contract premium in the first policy year exceeds that of the second year with no comparable additional benefit being provided in that first year, which policy provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the reserve according to the Commissioners reserve valuation method as of any policy anniversary occurring on or before the assumed ending date, defined herein as the first policy anniversary on which the sum of any endowment benefit and any cash surrender value then available is greater than such excess premium, shall, except as otherwise provided in paragraph (f) of subsection (3), be the greater of the reserve as of such policy anniversary calculated as described in the preceding part of this paragraph (b) and the reserve as of such policy anniversary calculated as described in the preceding part of this paragraph (b) with (i) the value defined in subpart A of the preceding part of this paragraph (b) being reduced by 15% of the amount of such excess first year premium, (ii) all present values of benefits and premiums being determined without reference to premiums or benefits provided for by the policy after the assumed ending date, (iii) the policy being assumed to mature on such date as an endowment, and (iv) the cash surrender value provided on such date being considered as an endowment benefit. In making the above comparison, the mortality and interest bases stated in paragraph (a) of subsection (3) and in subsection (6) shall be used.
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|
Reserves according to the Commissioners reserve
| | valuation method for (i) life insurance policies providing for a varying amount of insurance or requiring the payment of varying premiums, (ii) group annuity and pure endowment contracts purchased under a retirement plan or plan of deferred compensation, established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, (iii) disability and accidental death benefits in all policies and contracts, and (iv) all other benefits, except life insurance and endowment benefits in life insurance policies and benefits provided by all other annuity and pure endowment contracts, shall be calculated by a method consistent with the principles of this paragraph (b), except that any extra premiums charged because of impairments or special hazards shall be disregarded in the determination of modified net premiums.
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|
(c) In no event shall a company's aggregate reserves
| | for all life insurance policies, excluding disability and accidental death benefits be less than the aggregate reserves calculated in accordance with the methods set forth in paragraphs (b), (f), and (g) of subsection (3) and in subsection (5) and the mortality table or tables and rate or rates of interest used in calculating non-forfeiture benefits for such policies.
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(d) In no event shall the aggregate reserves for all
| | policies, contracts, and benefits be less than the aggregate reserves determined by the appointed actuary to be necessary to render the opinion required by subsection (1a).
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|
(e) Reserves for any category of policies, contracts
| | or benefits as established by the Director, may be calculated, at the option of the company, according to any standards which produce greater aggregate reserves for such category than those calculated according to the minimum standard herein provided, but the rate or rates of interest used for policies and contracts, other than annuity and pure endowment contracts, shall not be higher than the corresponding rate or rates of interest used in calculating any nonforfeiture benefits provided for therein.
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|
(f) If in any contract year the gross premium charged
| | by any life insurance company on any policy or contract is less than the valuation net premium for the policy or contract calculated by the method used in calculating the reserve thereon but using the minimum valuation standards of mortality and rate of interest, the minimum reserve required for such policy or contract shall be the greater of either the reserve calculated according to the mortality table, rate of interest, and method actually used for such policy or contract, or the reserve calculated by the method actually used for such policy or contract but using the minimum standards of mortality and rate of interest and replacing the valuation net premium by the actual gross premium in each contract year for which the valuation net premium exceeds the actual gross premium. The minimum valuation standards of mortality and rate of interest referred to in this paragraph (f) are those standards stated in subsection (6) and paragraph (a) of subsection (3).
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|
For any life insurance policy issued on or after
| | January 1, 1987, for which the gross premium in the first policy year exceeds that of the second year with no comparable additional benefit provided in that first year, which policy provides an endowment benefit or a cash surrender value or a combination thereof in an amount greater than such excess premium, the foregoing provisions of this paragraph (f) shall be applied as if the method actually used in calculating the reserve for such policy were the method described in paragraph (b) of subsection (3), ignoring the second paragraph of said paragraph (b). The minimum reserve at each policy anniversary of such a policy shall be the greater of the minimum reserve calculated in accordance with paragraph (b) of subsection (3), including the second paragraph of said paragraph (b), and the minimum reserve calculated in accordance with this paragraph (f).
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|
(g) In the case of any plan of life insurance which
| | provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience, or in the case of any plan of life insurance or annuity which is of such a nature that the minimum reserves cannot be determined by the methods described in paragraphs (b) and (f) of subsection (3) and subsection (5), the reserves which are held under any such plan shall:
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|
(i) be appropriate in relation to the benefits
| | and the pattern of premiums for that plan, and
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|
(ii) be computed by a method which is consistent
| | with the principles of this Standard Valuation Law, as determined by regulations promulgated by the Director.
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|
(4) Except as provided in subsection (6), the minimum standard of valuation for individual annuity and pure endowment contracts issued
on or after the operative date of this subsection, as defined herein, and
for all annuities and pure endowments purchased on or after such operative
date under group annuity and pure endowment contracts shall be the
Commissioners Reserve valuation methods defined in paragraph (b) of
subsection (3) and subsection (5) and the following tables and interest rates:
(a) For individual single premium immediate annuity
| | contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such contracts, or any modification of those tables approved by the Director, and 7 1/2% interest.
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|
(b) For individual and pure endowment contracts other
| | than single premium annuity contracts, excluding any disability and accidental death benefits in such contracts, the 1971 Individual Annuity Mortality Table, any individual annuity mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such contracts, or any modification of those tables approved by the Director, and 5 1/2% interest for single premium deferred annuity and pure endowment contracts and 4 1/2% interest for all other such individual annuity and pure endowment contracts.
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|
(c) For all annuities and pure endowments purchased
| | under group annuity and pure endowment contracts, excluding any disability and accidental death benefits purchased under such contracts, the 1971 Group Annuity Mortality Table, any group annuity mortality table adopted after 1980 by the NAIC and approved by regulations promulgated by the Director for use in determining the minimum standard of valuation for such annuities and pure endowments, or any modification of those tables approved by the Director, and 7 1/2% interest.
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|
After September 8, 1977, any company may file with the Director a written
notice of its election to comply with the provisions of this subsection
after a specified date before January 1, 1979, which shall be the operative
date of this subsection for such company; provided, a company may elect a
different operative date for individual annuity and pure endowment
contracts from that elected for group annuity and pure endowment contracts.
If a company makes no election, the operative date of this subsection for
such company shall be January 1, 1979.
(5) This subsection shall apply to all annuity and pure endowment contracts
other than group annuity and pure endowment contracts purchased under a
retirement plan or plan of deferred compensation, established or maintained
by an employer (including a partnership or sole proprietorship) or by an
employee organization, or by both, other than a plan providing individual
retirement accounts or individual retirement annuities under Section 408
of the Internal Revenue Code, as now or hereafter amended.
Reserves according to the Commissioners annuity reserve method for
benefits under annuity or pure endowment contracts, excluding any
disability and accidental death benefits in such contracts, shall be the
greatest of the respective excesses of the present values, at the date of
valuation, of the future guaranteed benefits, including guaranteed
nonforfeiture benefits, provided for by such contracts at the end of each
respective contract year, over the present value, at the date of valuation,
of any future valuation considerations derived from future gross
considerations, required by the terms of such contract, that become payable
prior to the end of such respective contract year. The future guaranteed
benefits shall be determined by using the mortality table, if any, and the
interest rate, or rates, specified in such contracts for determining
guaranteed benefits. The valuation considerations are the portions of the
respective gross considerations applied under the terms of such contracts
to determine nonforfeiture values.
(6)(a) Applicability of this subsection. The interest rates used
in determining the minimum standard for the valuation of
(A) all life insurance policies issued in a
| | particular calendar year, on or after the operative date of subsection (4c) of Section 229.2 (Standard Nonforfeiture Law),
|
|
(B) all individual annuity and pure endowment
| | contracts issued in a particular calendar year ending on or after December 31, 1983,
|
|
(C) all annuities and pure endowments purchased in a
| | particular calendar year ending on or after December 31, 1983, under group annuity and pure endowment contracts, and
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|
(D) the net increase in a particular calendar year
| | ending after December 31, 1983, in amounts held under guaranteed interest contracts
|
| shall be the calendar year statutory valuation interest rates, as defined
in this subsection.
(b) Calendar Year Statutory Valuation Interest Rates.
(i) The calendar year statutory valuation
| | interest rates shall be determined according to the following formulae, rounding "I" to the nearest .25%.
|
|
(A) For life insurance,
I = .03 + W (R1 - .03) + W/2 (R2 - .09).
(B) For single premium immediate annuities
| | and annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options,
|
|
I = .03 + W (R - .03) or with prior
| | approval of the Director I = .03 + W (Rq - .03).
|
|
For the purposes of this subparagraph (i), "I"
| | equals the calendar year statutory valuation interest rate, "R" is the reference interest rate defined in this subsection, "R1" is the lesser of R and .09, "R2" is the greater of R and .09, "Rq" is the quarterly reference interest rate defined in this subsection, and "W" is the weighting factor defined in this subsection.
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|
(C) For other annuities with cash settlement
| | options and guaranteed interest contracts with cash settlement options, valued on an issue year basis, except as stated in (B), the formula for life insurance stated in (A) applies to annuities and guaranteed interest contracts with guarantee durations in excess of 10 years, and the formula for single premium immediate annuities stated in (B) above applies to annuities and guaranteed interest contracts with guarantee durations of 10 years or less.
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|
(D) For other annuities with no cash
| | settlement options and for guaranteed interest contracts with no cash settlement options, the formula for single premium immediate annuities stated in (B) applies.
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|
(E) For other annuities with cash settlement
| | options and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, the formula for single premium immediate annuities stated in (B) applies.
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|
(ii) If the calendar year statutory valuation
| | interest rate for any life insurance policy issued in any calendar year determined without reference to this subparagraph differs from the corresponding actual rate for similar policies issued in the immediately preceding calendar year by less than .5%, the calendar year statutory valuation interest rate for such life insurance policy shall be the corresponding actual rate for the immediately preceding calendar year. For purposes of applying this subparagraph, the calendar year statutory valuation interest rate for life insurance policies issued in a calendar year shall be determined for 1980, using the reference interest rate defined for 1979, and shall be determined for each subsequent calendar year regardless of when subsection (4c) of Section 229.2 (Standard Nonforfeiture Law) becomes operative.
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|
(c) Weighting Factors.
(i) The weighting factors referred to in the
| | formulae stated in paragraph (b) are given in the following tables.
|
|
(A) Weighting Factors for Life Insurance.
|
Guarantee |
Weighting |
Duration |
Factors |
(Years) |
|
10 or less |
.50 |
More than 10, but not more than 20 |
.45 |
More than 20 |
.35 |
|
For life insurance, the guarantee duration is
| | the maximum number of years the life insurance can remain in force on a basis guaranteed in the policy or under options to convert to plans of life insurance with premium rates or nonforfeiture values or both which are guaranteed in the original policy.
|
|
(B) The weighting factor for single premium
| | immediate annuities and for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options is .80.
|
|
(C) The weighting factors for other annuities
| | and for guaranteed interest contracts, except as stated in (B) of this subparagraph (i), shall be as specified in tables (1), (2), and (3) of this subpart (C), according to the rules and definitions in (4), (5) and (6) of this subpart (C).
|
|
(1) For annuities and guaranteed interest
| | contracts valued on an issue year basis.
|
|
|
Guarantee |
Weighting Factor |
Duration |
for Plan Type |
(Years) |
A B C |
5 or less . . . . . . . . . . . . . . . . . . . . . . . .
|
.80 .60 .50 |
More than 5, but not |
|
more than 10 . . . . . . . . . . . . . . . . . . . . . .
|
.75 .60 .50 |
More than 10, but not |
|
more than 20 . . . . . . . . . . . . . . . . . . . . . .
|
.65 .50 .45 |
More than 20 . . . . . . . . . . . . . . . . . . . . . .
|
.45 .35 .35 |
|
(2) For annuities and guaranteed interest
| | contracts valued on a change in fund basis, the factors shown in (1) for Plan Types A, B and C are increased by .15, .25 and .05, respectively.
|
|
(3) For annuities and guaranteed interest
| | contracts valued on an issue year basis, other than those with no cash settlement options, which do not guarantee interest on considerations received more than one year after issue or purchase, and for annuities and guaranteed interest contracts valued on a change in fund basis which do not guarantee interest rates on considerations received more than 12 months beyond the valuation date, the factors shown in (1), or derived in (2), for Plan Types A, B and C are increased by .05.
|
|
(4) For other annuities with cash
| | settlement options and guaranteed interest contracts with cash settlement options, the guarantee duration is the number of years for which the contract guarantees interest rates in excess of the calendar year statutory valuation interest rate for life insurance policies with guarantee durations in excess of 20 years. For other annuities with no cash settlement options, and for guaranteed interest contracts with no cash settlement options, the guarantee duration is the number of years from the date of issue or date of purchase to the date annuity benefits are scheduled to commence.
|
|
(5) The plan types used in the above
| | tables are defined as follows.
|
|
Plan Type A is a plan under which the
| | policyholder may not withdraw funds, or may withdraw funds at any time but only (a) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, (b) without such an adjustment but in installments over 5 years or more, or (c) as an immediate life annuity.
|
|
Plan Type B is a plan under which the
| | policyholder may not withdraw funds before expiration of the interest rate guarantee, or may withdraw funds before such expiration but only (a) with an adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (b) without such adjustment but in installments over 5 years or more. At the end of the interest rate guarantee, funds may be withdrawn without such adjustment in a single sum or installments over less than 5 years.
|
|
Plan Type C is a plan under which the
| | policyholder may withdraw funds before expiration of the interest rate guarantee in a single sum or installments over less than 5 years either (a) without adjustment to reflect changes in interest rates or asset values since receipt of the funds by the insurance company, or (b) subject only to a fixed surrender charge stipulated in the contract as a percentage of the fund.
|
|
(6) A company may elect to value
| | guaranteed interest contracts with cash settlement options and annuities with cash settlement options on either an issue year basis or on a change in fund basis. Guaranteed interest contracts with no cash settlement options and other annuities with no cash settlement options shall be valued on an issue year basis. As used in this Section, "issue year basis of valuation" refers to a valuation basis under which the interest rate used to determine the minimum valuation standard for the entire duration of the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of issue or year of purchase of the annuity or guaranteed interest contract. "Change in fund basis of valuation", as used in this Section, refers to a valuation basis under which the interest rate used to determine the minimum valuation standard applicable to each change in the fund held under the annuity or guaranteed interest contract is the calendar year valuation interest rate for the year of the change in the fund.
|
|
(d) Reference Interest Rate. The reference interest
| | rate referred to in paragraph (b) of this subsection is defined as follows.
|
|
(A) For all life insurance, the reference
| | interest rate is the lesser of the average over a period of 36 months, and the average over a period of 12 months, with both periods ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year next preceding the year of issue, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(B) For single premium immediate annuities and
| | for annuity benefits involving life contingencies arising from other annuities with cash settlement options and guaranteed interest contracts with cash settlement options, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or year of purchase, of Moody's Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(C) For annuities with cash settlement options
| | and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except those described in (B), with guarantee durations in excess of 10 years, the reference interest rate is the lesser of the average over a period of 36 months and the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(D) For other annuities with cash settlement
| | options and guaranteed interest contracts with cash settlement options, valued on a year of issue basis, except those described in (B), with guarantee durations of 10 years or less, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
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|
(E) For annuities with no cash settlement options
| | and for guaranteed interest contracts with no cash settlement options, the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of issue or purchase, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(F) For annuities with cash settlement options
| | and guaranteed interest contracts with cash settlement options, valued on a change in fund basis, except those described in (B), the reference interest rate is the average over a period of 12 months, ending on June 30, or with prior approval of the Director ending on December 31, of the calendar year of the change in the fund, of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(G) For annuities valued by a formula based on
| | Rq, the quarterly reference interest rate is, with the prior approval of the Director, the average within each of the 4 consecutive calendar year quarters ending on March 31, June 30, September 30 and December 31 of the calendar year of issue or year of purchase of Moody's Corporate Bond Yield Average-Monthly Average Corporates, as published by Moody's Investors Service, Inc.
|
|
(e) Alternative Method for Determining Reference
| | Interest Rates. In the event that the Moody's Corporate Bond Yield Average-Monthly Average Corporates is no longer published by Moody's Investors Services, Inc., or in the event that the NAIC determines that Moody's Corporate Bond Yield Average-Monthly Average Corporates as published by Moody's Investors Service, Inc. is no longer appropriate for the determination of the reference interest rate, then an alternative method for determination of the reference interest rate, which is adopted by the NAIC and approved by regulations promulgated by the Director, may be substituted.
|
|
(7) Minimum Standards for Accident and Health (Disability, Accident and Sickness) Insurance Contracts. The Director shall promulgate a regulation containing the minimum
standards applicable to the valuation of health (disability, sickness and
accident) plans which are issued prior to the operative date of the Valuation Manual. For accident and health (disability, accident and sickness) insurance contracts issued on or after the operative date of the Valuation Manual, the standard prescribed in the Valuation Manual is the minimum standard of valuation required under subsection (1).
(8) Valuation Manual for Policies Issued On or After the Operative Date of the Valuation Manual.
(a) For policies issued on or after the operative
| | date of the Valuation Manual, the standard prescribed in the Valuation Manual is the minimum standard of valuation required under subsection (1), except as provided under paragraphs (e) or (g) of this subsection (8).
|
| (b) The operative date of the Valuation Manual is
| | January 1 of the first calendar year following the first July 1 when all of the following have occurred:
|
| (i) The Valuation Manual has been adopted by the
| | NAIC by an affirmative vote of at least 42 members, or three-fourths of the members voting, whichever is greater.
|
| (ii) The Standard Valuation Law, as amended by
| | the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by states representing greater than 75% of the direct premiums written as reported in the following annual statements submitted for 2008: life, accident and health annual statements; health annual statements; or fraternal annual statements.
|
| (iii) The Standard Valuation Law, as amended by
| | the NAIC in 2009, or legislation including substantially similar terms and provisions, has been enacted by at least 42 of the following 55 jurisdictions: the 50 states of the United States, American Samoa, the American Virgin Islands, the District of Columbia, Guam, and Puerto Rico.
|
| (c) Unless a change in the Valuation Manual specifies
| | a later effective date, changes to the Valuation Manual shall be effective on January 1 following the date when the change to the Valuation Manual has been adopted by the NAIC by an affirmative vote representing:
|
| (i) at least three-fourths of the members of the
| | NAIC voting, but not less than a majority of the total membership; and
|
| (ii) members of the NAIC representing
| | jurisdictions totaling greater than 75% of the direct premiums written as reported in the following annual statements most recently available prior to the vote in subparagraph (i) of this paragraph (c): life, accident and health annual statements; health annual statements; or fraternal annual statements.
|
| (d) The Valuation Manual must specify all of the
| | (i) Minimum valuation standards for and
| | definitions of the policies or contracts subject to subsection (1). Such minimum valuation standards shall be:
|
| (A) the Commissioners reserve valuation
| | method for life insurance contracts, other than annuity contracts, subject to subsection (1);
|
| (B) the Commissioners annuity reserve
| | valuation method for annuity contracts subject to subsection (1); and
|
| (C) minimum reserves for all other policies
| | or contracts subject to subsection (1).
|
| (ii) Which policies or contracts or types of
| | policies or contracts are subject to the requirements of a principle-based valuation in paragraph (a) of subsection (9) and the minimum valuation standards consistent with those requirements.
|
| (iii) For policies and contracts subject to a
| | principle-based valuation under subsection (9):
|
| (A) Requirements for the format of reports to
| | the Director under subparagraph (iii) of paragraph (b) of subsection (9), and which shall include information necessary to determine if the valuation is appropriate and in compliance with this Section.
|
| (B) Assumptions shall be prescribed for risks
| | over which the company does not have significant control or influence.
|
| (C) Procedures for corporate governance and
| | oversight of the actuarial function, and a process for appropriate waiver or modification of such procedures.
|
| (iv) For policies not subject to a
| | principle-based valuation under subsection (9), the minimum valuation standard shall either:
|
| (A) be consistent with the minimum standard
| | of valuation prior to the operative date of the Valuation Manual; or
|
| (B) develop reserves that quantify the
| | benefits and guarantees and the funding associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring.
|
| (v) Other requirements, including, but not
| | limited to, those relating to reserve methods, models for measuring risk, generation of economic scenarios, assumptions, margins, use of company experience, risk measurement, disclosure, certifications, reports, actuarial opinions and memorandums, transition rules, and internal controls.
|
| (vi) The data and form of the data required under
| | subsection (10) of this Section, with whom the data must be submitted, and may specify other requirements, including data analyses and the reporting of analyses.
|
|
(e) In the absence of a specific valuation
| | requirement or if a specific valuation requirement in the Valuation Manual is not, in the opinion of the Director, in compliance with this Section, then the company shall, with respect to such requirements, comply with minimum valuation standards prescribed by the Director by rule.
|
| (f) The Director may engage a qualified actuary, at
| | the expense of the company, to perform an actuarial examination of the company and opine on the appropriateness of any reserve assumption or method used by the company, or to review and opine on a company's compliance with any requirement set forth in this Section. The Director may rely upon the opinion regarding provisions contained within this Section of a qualified actuary engaged by the Director of another state, district, or territory of the United States. As used in this paragraph, "engage" includes employment and contracting.
|
| (g) The Director may require a company to change any
| | assumption or method that in the opinion of the Director is necessary in order to comply with the requirements of the Valuation Manual or this Section; and the company shall adjust the reserves as required by the Director. The Director may take other disciplinary action as permitted pursuant to law.
|
| (9) Requirements of a Principle-Based Valuation.
(a) A company must establish reserves using a
| | principle-based valuation that meets the following conditions for policies or contracts as specified in the Valuation Manual:
|
| (i) Quantify the benefits and guarantees, and the
| | funding, associated with the contracts and their risks at a level of conservatism that reflects conditions that include unfavorable events that have a reasonable probability of occurring during the lifetime of the contracts. For policies or contracts with significant tail risk, reflect conditions appropriately adverse to quantify the tail risk.
|
| (ii) Incorporate assumptions, risk analysis
| | methods, and financial models and management techniques that are consistent with, but not necessarily identical to, those utilized within the company's overall risk assessment process, while recognizing potential differences in financial reporting structures and any prescribed assumptions or methods.
|
| (iii) Incorporate assumptions that are derived in
| | one of the following manners:
|
| (A) The assumption is prescribed in the
| | (B) For assumptions that are not prescribed,
| | (1) be established utilizing the
| | company's available experience, to the extent it is relevant and statistically credible; or
|
| (2) to the extent that company data is
| | not available, relevant, or statistically credible, be established utilizing other relevant, statistically credible experience.
|
| (iv) Provide margins for uncertainty, including
| | adverse deviation and estimation error, such that the greater the uncertainty, the larger the margin and resulting reserve.
|
| (b) A company using a principle-based valuation for
| | one or more policies or contracts subject to this subsection as specified in the Valuation Manual shall:
|
| (i) Establish procedures for corporate governance
| | and oversight of the actuarial valuation function consistent with those described in the Valuation Manual.
|
| (ii) Provide to the Director and the board of
| | directors an annual certification of the effectiveness of the internal controls with respect to the principle-based valuation. Such controls shall be designed to ensure that all material risks inherent in the liabilities and associated assets subject to such valuation are included in the valuation, and that valuations are made in accordance with the Valuation Manual. The certification shall be based on the controls in place as of the end of the preceding calendar year.
|
| (iii) Develop and file with the Director upon
| | request a principle-based valuation report that complies with standards prescribed in the Valuation Manual.
|
| (c) A principle-based valuation may include a
| | prescribed formulaic reserve component.
|
| (10) Experience Reporting for Policies In Force On or After the Operative Date of the Valuation Manual. A company shall submit mortality, morbidity, policyholder behavior, or expense experience and other data as prescribed in the Valuation Manual.
(11) Confidentiality.
(a) For the purposes of this subsection (11),
| | "confidential information" means any of the following:
|
| (i) A memorandum in support of an opinion
| | submitted under subsection (1) of this Section and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by or disclosed to the Director or any other person in connection with the memorandum.
|
| (ii) All documents, materials, and other
| | information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Director or any other person in the course of an examination made under paragraph (f) of subsection (8) of this Section.
|
| (iii) Any reports, documents, materials, and
| | other information developed by a company in support of, or in connection with, an annual certification by the company under subparagraph (ii) of paragraph (b) of subsection (9) of this Section evaluating the effectiveness of the company's internal controls with respect to a principle-based valuation and any other documents, materials, and other information, including, but not limited to, all working papers, and copies thereof, created, produced, or obtained by or disclosed to the Director or any other person in connection with such reports, documents, materials, and other information.
|
| (iv) Any principle-based valuation report
| | developed under subparagraph (iii) of paragraph (b) of subsection (9) of this Section and any other documents, materials and other information, including, but not limited to, all working papers, and copies thereof, created, produced or obtained by or disclosed to the Director or any other person in connection with such report.
|
| (v) Any documents, materials, data, and other
| | information submitted by a company under subsection (10) of this Section (collectively, "experience data") and any other documents, materials, data, and other information, including, but not limited to, all working papers, and copies thereof, created or produced in connection with such experience data, in each case that include any potentially company-identifying or personally identifiable information, that is provided to or obtained by the Director (together with any experience data, the "experience materials") and any other documents, materials, data and other information, including, but not limited to, all working papers and copies thereof, created, produced, or obtained by or disclosed to the Director or any other person in connection with such experience materials.
|
| (b) Privilege for and Confidentiality of Confidential
| | (i) Except as provided in this subsection (11), a
| | company's confidential information is confidential by law and privileged, and shall not be subject to the Freedom of Information Act, subpoena, or discovery or admissible as evidence in any private civil action; however, the Director is authorized to use the confidential information in the furtherance of any regulatory or legal action brought against the company as a part of the Director's official duties.
|
| (ii) Neither the Director nor any person who
| | received confidential information while acting under the authority of the Director shall be permitted or required to testify in any private civil action concerning any confidential information.
|
| (iii) In order to assist in the performance of
| | the Director's duties, the Director may share confidential information (A) with other state, federal, and international regulatory agencies and with the NAIC and its affiliates and subsidiaries and (B) in the case of confidential information specified in subparagraphs (i) and (iv) of paragraph (a) of subsection (11) only, with the Actuarial Board for Counseling and Discipline or its successor upon request stating that the confidential information is required for the purpose of professional disciplinary proceedings and with state, federal, and international law enforcement officials; in the case of (A) and (B), provided that such recipient agrees and has the legal authority to agree, to maintain the confidentiality and privileged status of such documents, materials, data, and other information in the same manner and to the same extent as required for the Director.
|
| (iv) The Director may receive documents,
| | materials, data, and other information, including otherwise confidential and privileged documents, materials, data, or information, from the NAIC and its affiliates and subsidiaries, from regulatory or law enforcement officials of other foreign or domestic jurisdictions, and from the Actuarial Board for Counseling and Discipline or its successor and shall maintain as confidential or privileged any document, material, data, or other information received with notice or the understanding that it is confidential or privileged under the laws of the jurisdiction that is the source of the document, material, or other information.
|
| (v) The Director may enter into agreements
| | governing the sharing and use of information consistent with paragraph (b) of this subsection (11).
|
| (vi) No waiver of any applicable privilege or
| | claim of confidentiality in the confidential information shall occur as a result of disclosure to the Director under this subsection (11) or as a result of sharing as authorized in subparagraph (iii) of paragraph (b) of this subsection (11).
|
| (vii) A privilege established under the law of
| | any state or jurisdiction that is substantially similar to the privilege established under paragraph (b) of this subsection (11) shall be available and enforced in any proceeding in and in any court of this State.
|
| (viii) In this subsection (11), "regulatory
| | agency", "law enforcement agency", and "NAIC" include, but are not limited to, their employees, agents, consultants, and contractors.
|
| (c) Notwithstanding paragraph (b) of this subsection
| | (11), any confidential information specified in subparagraphs (i) and (iv) of paragraph (a) of this subsection (11):
|
| (i) may be subject to subpoena for the purpose of
| | defending an action seeking damages from the appointed actuary submitting the related memorandum in support of an opinion submitted under subsection (1) of this Section or principle-based valuation report developed under subparagraph (iii) of paragraph (b) of subsection (9) of this Section by reason of an action required by this Section or by regulations promulgated under this Section;
|
| (ii) may otherwise be released by the Director
| | with the written consent of the company; and
|
| (iii) once any portion of a memorandum in support
| | of an opinion submitted under subsection (1) of this Section or a principle-based valuation report developed under subparagraph (iii) of paragraph (b) of subsection (9) of this Section is cited by the company in its marketing or is publicly volunteered to or before a governmental agency other than a state insurance department or is released by the company to the news media, all portions of such memorandum or report shall no longer be confidential.
|
| (12) Exemptions.
(a) The Director may exempt specific product forms or
| | product lines of a domestic company that is licensed and doing business only in Illinois from the requirements of subsection (8) of this Section, provided that:
|
| (i) the Director has issued an exemption in
| | writing to the company and has not subsequently revoked the exemption in writing; and
|
| (ii) the company computes reserves using
| | assumptions and methods used prior to the operative date of the Valuation Manual in addition to any requirements established by the Director and adopted by rule.
|
| (b) For any company granted an exemption under this
| | subsection, subsections (1), (2), (3), (4), (5), (6), and (7) shall be applicable. With respect to any company applying this exemption, any reference to subsection (8) found in subsections (1), (2), (3), (4), (5), (6), and (7) shall not be applicable.
|
| (13) Definitions.
For the purposes of this Section, the following definitions shall apply beginning on the operative date of the Valuation Manual:
"Accident and health insurance" means contracts that incorporate morbidity risk and provide protection against economic loss resulting from accident, sickness, or medical conditions and as may be specified in the Valuation Manual.
"Appointed actuary" means a qualified actuary who is appointed in accordance with the Valuation Manual to prepare the actuarial opinion required in paragraph (b) of subsection (1) of this Section.
"Company" means an entity that (a) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in this State and has at least one such policy in force or on claim or (b) has written, issued, or reinsured life insurance contracts, accident and health insurance contracts, or deposit-type contracts in any state and is required to hold a certificate of authority to write life insurance, accident and health insurance, or deposit-type contracts in this State.
"Deposit-type contract" means contracts that do not incorporate mortality or morbidity risks and as may be specified in the Valuation Manual.
"Life insurance" means contracts that incorporate mortality risk, including annuity and pure endowment contracts, and as may be specified in the Valuation Manual.
"NAIC" means the National Association of Insurance Commissioners.
"Policyholder behavior" means any action a policyholder, contract holder, or any other person with the right to elect options, such as a certificate holder, may take under a policy or contract subject to this Section including, but not limited to, lapse, withdrawal, transfer, deposit, premium payment, loan, annuitization, or benefit elections prescribed by the policy or contract, but excluding events of mortality or morbidity that result in benefits prescribed in their essential aspects by the terms of the policy or contract.
"Principle-based valuation" means a reserve valuation that uses one or more methods or one or more assumptions determined by the insurer and is required to comply with subsection (9) of this Section as specified in the Valuation Manual.
"Qualified actuary" means an individual who is qualified to sign the applicable statement of actuarial opinion in accordance with the American Academy of Actuaries qualification standards for actuaries signing such statements and who meets the requirements specified in the Valuation Manual.
"Tail risk" means a risk that occurs either where the frequency of low probability events is higher than expected under a normal probability distribution or where there are observed events of very significant size or magnitude.
"Valuation Manual" means the manual of valuation instructions adopted by the NAIC as specified in this Section or as subsequently amended.
(Source: P.A. 99-162, eff. 1-1-16 .)
|
215 ILCS 5/224
(215 ILCS 5/224) (from Ch. 73, par. 836)
Sec. 224. Standard provisions for life policies.
(1) After the
first day of July, 1937, no policy of life insurance other than
industrial, group or annuities and pure endowments with or without
return of premiums or of premiums and interest, may be issued or
delivered in this State, unless such policy contains in substance the
following provisions:
(a) A provision that all premiums after the first | | shall be payable in advance either at the home office of the company or to an agent of the company, upon delivery of a receipt signed by one or more of the officers who shall be designated in the policy, when such receipt is requested by the policyholder.
|
|
(b) A provision that the insured is entitled to a
| | grace period either of 30 days or of one month within which the payment of any premium after the first may be made, subject at the option of the company to an interest charge not in excess of 6% per annum for the number of days of grace elapsing before the payment of the premium, during which period of grace the policy shall continue in force, but in case the policy becomes a claim during the grace period before the overdue premium is paid, or the deferred premiums of the current policy year, if any, are paid, the amount of such premium or premiums with interest thereon may be deducted in any settlement under the policy.
|
|
(c) A provision that the policy, together with the
| | application therefor, a copy of which shall be endorsed upon or attached to the policy and made a part thereof, shall constitute the entire contract between the parties and that after it has been in force during the lifetime of the insured a specified time, not later than 2 years from its date, it shall be incontestable except for nonpayment of premiums and except at the option of the company, with respect to provisions relative to benefits in the event of total and permanent disability, and provisions which grant additional insurance specifically against death by accident and except for violations of the conditions of the policy relating to naval or military service in time of war or for violation of an express condition, if any, relating to aviation, (except riding as a fare-paying passenger of a commercial air line flying on regularly scheduled routes between definitely established airports) in which case the liability of the company shall be fixed at a definitely determined amount not less than the full reserve for the policy and any dividend additions; provided that the application therefor need not be attached to or made a part of any policy containing a clause making the policy incontestable from date of issue.
|
|
(d) A provision that if it is found at any time
| | before final settlement under the policy that the age of the insured (or the age of the beneficiary, if considered in determining the premium) has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age or ages, according to the company's published rate at date of issue.
|
|
(e) A provision that the policy shall participate
| | annually in the surplus of the company beginning not later than the end of the third policy year; and any policy containing provision for annual participation beginning at the end of the first policy year, may also provide that each dividend be paid subject to the payment of the premiums for the next ensuing year; and the insured under any annual dividend policy shall have the right each year to have the dividend arising from such participation either paid in cash, or applied in reduction of premiums, or applied to the purchase of paid-up additional insurance, or be left to accumulate to the credit of the policy, with interest at such rate as may be determined from time to time by the company, but not less than a guaranteed minimum rate specified in the policy, and payable at the maturity of the policy, but withdrawable on any anniversary date, subject to such further provisions as the policy may provide regarding the application of dividends toward the payment of any premiums unpaid at the end of the grace period; and if the insured fails to notify the company in writing of his election within the period of grace allowed for the payment of premium, the policy shall further provide which of such options are effective.
|
|
(f) A provision that after the policy has been in
| | force 3 full years the company at any time, while the policy is in force, will advance, on proper assignment or pledge of the policy and on the sole security thereof, at a specified maximum fixed or adjusted rate of interest in accordance with Section 229.5, a sum equal to, or at the option of the insured less than the amount required by Section 229.3 under the conditions specified thereby and with notification as required by Section 229.5; and that the company will deduct from such loan value any indebtedness not already deducted in determining such value and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year; and any policy may also provide that if the interest on the loan is not paid when due it shall be added to the existing loan and shall bear interest at the same rate. No condition other than as provided herein or in Sections 229.3 and 229.5 shall be exacted as a prerequisite to any such loan. This clause shall not apply to term insurance.
|
|
(g) A provision for nonforfeiture benefits and cash
| | surrender values in accordance with the requirements of paragraph (1) of Section 229.1 or, Section 229.2.
|
|
(h) A table showing in figures the loan values and
| | the options available under the policy each year, upon default in premium payments, during at least the first 20 years of the policy; the policy to contain a provision that the company will furnish upon request an extension of such table beyond the years shown in the policy.
|
|
(i) A provision that in event of default in premium
| | payments the value of the policy is applied to the purchase of other insurance as provided in this Section, and if such insurance is in force and the original policy is not surrendered to the company and cancelled, the policy may be reinstated within 3 years from such default, upon evidence of insurability satisfactory to the company and payment of arrears of premiums and the payment or reinstatement of any other indebtedness to the company upon the policy, with interest on the premiums at a rate not exceeding 6% per annum payable annually and with interest on the indebtedness at a rate not exceeding the rate prescribed by Section 229.5.
|
|
(j) A provision that when a policy is a claim by the
| | death of the insured settlement shall be made upon receipt of due proof of death and not later than 2 months after the receipt of such proof. The policy may require that due proof of the death of the insured shall consist of a certified copy of the death certificate of the insured, or other lawful evidence providing equivalent information, and proof of the claimant's interest in the proceeds.
|
|
(k) If the policy provides for payment of its
| | proceeds in installments, a table showing the amount and period of such installments shall be included in the policy.
|
|
(l) Interest shall accrue on the proceeds payable
| | because of the death of the insured, from date of death, at the rate of 10% annually on the total amount payable or the face amount if payments are to be made in installments until the total payment or first installment is paid, unless payment is made within 31 days from the latest of the following to occur:
|
| (1) the date that due proof of death is received
| | (2) the date that the company receives sufficient
| | information to determine its liability, the extent of the liability, and the appropriate payee legally entitled to the proceeds; or
|
| (3) the date that legal impediments to payment of
| | proceeds that depend on the action of parties other than the company are resolved and sufficient evidence of the same is provided to the company; legal impediments to payment include, but are not limited to, (A) the establishment of guardianships and conservatorships, (B) the appointment and qualification of trustees, executors, and administrators, and (C) the submission of information required to satisfy State and federal reporting requirements.
|
| This provision need not appear in the policy, however,
| | the company shall notify the beneficiary at the time of claim of this provision. The payment of interest shall apply to all policies now in force, as well as those written after the effective date of this amendment.
|
|
(m) Title on the face and on the back of the policy
| | briefly describing its form.
|
|
(n) A provision, or a notice attached to the policy,
| | to the effect that during a period of ten days from the date the policy is delivered to the policy owner, it may be surrendered to the insurer together with a written request for cancellation of the policy and in such event, the insurer will refund any premium paid therefor, including any policy fees or other charges. The Director may by rule exempt specific types of policies from the requirements of this subsection.
|
|
(2) In the case of the replacement of life insurance, as defined in the
rule promulgated by the Director, the replacing insurer shall either (1)
delay the issuance of its policy for not less than 20 days from the date
it has transmitted a policy summary to the existing insurer, or (2) provide
in a form titled "Notice Regarding Replacement of Life Insurance", as well
as in its policy, or in a separate notice delivered with the policy, that
the insured has the right to an unconditional refund of all premiums paid,
and that such right may be exercised within a period of 20 days commencing
from the date of delivery of such policy. Where option (2) is exercised,
the replacing insurer shall also transmit a policy summary to the existing
insurer within 3 working days after the date the replacement policy is issued.
(3) Any of the foregoing provisions or portions thereof not
applicable to single premium or nonparticipating or term policies shall
to that extent not be incorporated therein. This Section shall not
apply to policies of reinsurance nor to policies issued or granted
pursuant to the nonforfeiture provisions prescribed in subparagraph (g)
of paragraph (1) of this Section.
(Source: P.A. 97-527, eff. 8-23-11.)
|
215 ILCS 5/224.05 (215 ILCS 5/224.05) Sec. 224.05. Military personnel in military service; no lapse of life insurance policy. (a) Except as provided in subsection (b), this Section shall apply to any individual life insurance policy insuring the life of a resident of Illinois who is a member of any component of the U.S. Armed Forces or the National Guard of any state, the District of Columbia, a commonwealth, or a territory of the United States who has entered any full-time training or duty which the service member was ordered to report by the President, Governor of a state, commonwealth, or territory of the United States, or other appropriate military authority, if the life insurance policy meets both of the following conditions: (1) The policy has been in force for at least 180 | | (2) The policy has been brought within the
| | "Servicemembers Civil Relief Act," 117 Stat. 2835 (2003), 50 U.S.C. App. 541 and following.
|
| (b) This Section does not apply to any policy that was cancelled or that had lapsed for the nonpayment of premiums prior to the commencement of the insured's period of military service.
(c) An individual life insurance policy described in this Section shall not lapse or be forfeited for the nonpayment of premiums during the military service of a service member in excess of 29 consecutive days during the 2-year period subsequent to the end of the member's period of military service.
(d) In order to be eligible for the benefits granted to service members under this Section, a service member must provide the life insurance company with a copy of the orders calling the service member to military service and of any orders further extending the service member's period of service.
(e) This Section does not limit a life insurance company's enforcement of provisions in the insured's policy relating to naval or military service in time of war.
(f) A violation of this Section constitutes a civil rights violation under the Illinois Human Rights Act.
All proceeds from the collection of any civil penalty imposed under this subsection shall be deposited into the Illinois Military Family Relief Fund.
(Source: P.A. 97-913, eff. 1-1-13.)
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215 ILCS 5/224.1
(215 ILCS 5/224.1) (from Ch. 73, par. 836.1)
Sec. 224.1.
Employer insurable interest.
Notwithstanding any other
Section of this Code, an employer or an employer sponsored trust for the
benefit of its employees has an insurable interest in the lives of the
employer's directors, officers, managers, nonmanagement employees, and
retired employees and may insure those lives on an individual or group
basis with the consent of the insured. The consent requirement will be
satisfied if the insured is provided written notice of the coverage and
does not reject such coverage within 30 days of receipt of such notice. The
extent of the employer's or the trust's insurable interest for nonmanagement
and retired employees shall be limited to an amount commensurate with the
employer's projected unfunded liabilities to nonmanagement and retired
employees for welfare benefit plans, as defined by the Employee Retirement
Income Security Act of 1974, Public Law 93-406, 88 Stat. 829, calculated
according to accepted actuarial principles. An insurable interest must exist
at the time the contract of life or disability insurance becomes effective, but
need not exist at the time the loss occurs. An employer shall not retaliate in
any manner against an employee or a retired employee for refusing consent to be
insured. The proceeds of any policy or certificate issued pursuant to this
Section are exempt from the claims of any creditor or dependent of the insured.
As used herein, "employer" means an individual, sole proprietorship,
partnership, firm, corporation, association, or any other legal entity that has
one or more employees and is legally doing business in this State.
(Source: P.A. 87-936.)
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215 ILCS 5/225
(215 ILCS 5/225) (from Ch. 73, par. 837)
Sec. 225.
Prohibited
Provisions for Life Policies.
(1) After the effective date of this Code no policy of life insurance
may be issued or delivered in this State if it includes any of the
following provisions:
(a) A provision limiting the time within which any action may be commenced
to less than 3 years after the cause of action
accrues.
(b) A provision by which the policy purports to be issued or take effect
more than 6 months before the original application for the insurance was
made, but this provision does not apply in any case of a transfer from one
form of policy to another in connection with which the policy owner
receives credit for any reserve accumulation under the form of policy from
which the transfer was made.
(c) A provision for any mode of settlement at maturity after the
expiration of the contestable period of the policy of less value than the
amount insured plus dividend additions, if any,
less any indebtedness to the company on or secured by the policy, and less
any premium that may by the terms of the policy be deducted, except as
permitted by clause (c) of subsection (1) of Section 224.
(d) A provision for forfeiture of the policy for failure to repay any
loan on the policy, or to pay interest on such loan, while the total
indebtedness on the policy, including interest, is less than the loan value
thereof.
(e) A provision to the effect that the agent soliciting the insurance is
the agent of the person insured under the policy, or making the acts or
representations of such agent binding upon the person so insured under the
policy.
(f) A provision limiting the amount payable under a policy by reason of
death occurring after the expiration of the contestable period to less than
the face amount thereof on account of the kind or character of disease
causing the insured's death.
(2) The provisions of this section do not apply to policies of
reinsurance, nor to policies issued or granted under the nonforfeiture
provisions prescribed in clause (g) of subsection (1) of Section 224.
(Source: P.A. 83-345.)
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215 ILCS 5/226
(215 ILCS 5/226) (from Ch. 73, par. 838)
Sec. 226.
Standard
provisions for annuities and pure endowment contracts. (1) After the effective
date of this Section and any amendments thereto no annuity
or pure endowment
contract, except in case of reversionary annuities, survivorship annuities
or annuities contracted by an employer on behalf of his employees, shall be
issued or delivered in this State unless it contains in substance the
following provisions:
(a) A provision that there shall be a period of grace, either of thirty
days or of one month, within which any stipulated payment to the company
falling due after the first year may be made, subject at the option of the
company, to an interest charge thereon at a rate to be specified in the
contract but not exceeding six per centum per annum for the number of days
of grace elapsing before such payment, during which period of grace, the
contract shall continue in full force; but in case a claim arises under the
contract on account of death during the said period of grace before the
overdue payment to the company or the deferred payments of the current
contract year, if any, are made, the amount of such payments, with interest
on any overdue payments, may be deducted from any amount payable under the
contract in settlement.
(b) If statements, other than those relating to age and identity, are
required as a condition to issuing the contract, a provision that the
contract shall be incontestable after it has been in force during the
lifetime of the person or each of the persons as to whom such statements
are required, for a period of two years from its date of issue, except
where stipulated payments to the company have not been made and except for
violations of the conditions of the contract relating to military or naval
service in time of war and except, at the option of the company, with
respect to provisions relative to benefits in the event of total and
permanent disability and provisions which grant insurance specifically
against death by accident.
(c) A provision that such a contract shall constitute the entire
contract between the parties, but if the company desires to make the
application a part of the contract it may do so, provided a copy of such
application shall be endorsed upon or attached to such contract when
issued, and in such case such contract shall contain a provision that it,
together with the application therefor, shall constitute the entire
contract between the parties.
(d) A provision that if the age or ages of the person or persons upon
whose life or lives the contract is based, or any of them, have been
misstated, the amount payable under the contract shall be such as the
stipulated payments to the company would have purchased at the correct age
or ages.
(e) If the contract is participating, a provision that the divisible
surplus shall be apportioned annually and dividends shall be payable in
cash or shall be applicable to any stipulated payment or payments to the
company under the contract.
(f) A provision that after the contract has been in force for three
years, if it shall, by its terms, lapse because any stipulated payment to
the company shall not have been made, the reserve on such contract,
exclusive of the reserve on account of total and permanent disability and
additional accidental death benefits, computed according to the standard
adopted by the company and in accordance with section 223, shall after
deducting not more than one-fifth of the said entire reserve and any
indebtedness to the company under the contract, be applied as a net single
payment according to said standard, for the purchase of a paid-up annuity
or a pure endowment contract, which may be nonparticipating and which
shall be payable by the company under the same terms and conditions as the
original contract, except as to amount.
(g) A provision that the contract may be reinstated at any time within
one year from the date of default in making stipulated payments to the company,
but all overdue stipulated payments and any indebtedness to the company
on the contract shall be paid or reinstated, with interest thereon at a
rate to be specified in the contract but not exceeding six per centum per
annum payable annually, and in cases where applicable, a company may also
include a requirement of evidence of insurability satisfactory to the company.
(h) A provision, or a notice attached to the contract, to the effect
that during a period of 10 days from the date the contract is delivered
to the contract-owner
it may be surrendered to the insurer together with a written request for
cancellation of the contract, and that in such event, with the exception
of a variable annuity contract, the insurer will refund any premium paid
for the contract, including any contract fees or other charges. Cancellation
under a variable annuity contract shall entitle a person to an amount equal
to the sum of (i) the difference between the premiums paid including any
contract fees or other services and the amounts allocated to any separate
accounts under the contract and (ii) the cash value of the contract or,
if the contract does not have a cash value, the reserve for the contract,
on the date the return contract is received by the insurer or its agent. The Director
may by rule exempt specific types of contracts from this paragraph.
(2) Any overpayment by the company on account of misstatement of age,
shall be charged against the current or next succeeding payment or payments
to be made by the company under the contract, with interest thereon at a
rate to be specified in the contract but not exceeding six per centum per annum.
(3) A company may provide, in lieu of the paid-up values provided in
clause (f) of subsection (1), for a paid-up annuity or pure endowment
contract in an amount bearing the same proportion to the original annuity
or pure endowment contract as the number of stipulated payments which shall
have been made to the company shall bear to the total number of stipulated
payments required to be made to the company under contract, and if there be
any indebtedness to the company under the contract the amount of such
paid-up annuity or pure endowment shall be reduced by an amount bearing the
same proportion to such paid-up annuity or pure endowment as such
indebtedness bears to the cash value on such paid-up annuity or pure
endowment, computed according to the standard adopted by the company in
accordance with section 223.
(Source: P.A. 82-594.)
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215 ILCS 5/226.1
(215 ILCS 5/226.1) (from Ch. 73, par. 838.1)
Sec. 226.1.
Entitled annuity payment options.
Annuity contracts and
funding agreements may be
issued without a life contingency annuity payment option in the following
circumstances: (1) to fund benefits under an employee benefit plan as
defined in the Employee Retirement Income Security Act of 1974, as now or
hereafter amended; (2) to fund the activities of an organization exempt
from taxation under Internal Revenue Code Section 501(c), as now or
hereafter amended; (3) to fund a program of a governmental entity or of an
agency or instrumentality thereof; (4) to fund an agreement providing for
periodic payments entered into in satisfaction of a claim; or (5) to fund a
program of an institution having assets in excess of $25,000,000.
(Source: P.A. 92-875, eff. 1-3-03.)
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215 ILCS 5/227
(215 ILCS 5/227) (from Ch. 73, par. 839)
Sec. 227.
Standard
provisions for reversionary or survivorship annuity contracts.
(1) After the effective date of this Code no contract for a reversionary
annuity or survivorship annuity shall be issued or delivered in this State
unless it contains in substance the following provisions:
(a) The provisions of clauses (a), (b), (c), (d) and (e) of subsection
(1) of section 226, except that under said clause (a) the company may at
its option provide for an equitable reduction of the amount of the annuity
payments in settlement of an overdue or deferred payment in lieu of
providing for a deduction of such payments from an amount payable upon a
settlement under the contract.
(b) A provision that the contract may be reinstated at any time within
three years from the date of default in making stipulated payments to the
company, upon production of evidence of insurability satisfactory to the
company, provided that all overdue payments and any indebtedness to the
company on account of the contract shall be paid or reinstated with
interest thereon at a rate to be specified in the contract but not
exceeding six per centum per annum payable annually.
(2) Any of the foregoing provisions or portions thereof contained in
this section and in section 226 not applicable to non-participating
contracts nor to contracts for which a single stipulated payment to the
company is made, shall, to that extent, not be incorporated therein.
(3) The provisions of this section and section 226 shall not apply to
contracts of re-insurance nor to contracts for deferred annuities or
reversionary annuities included in life insurance policies.
(Source: Laws 1937, p. 696.)
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215 ILCS 5/228
(215 ILCS 5/228) (from Ch. 73, par. 840)
Sec. 228.
Industrial
Life Insurance Defined.
As used in this Code "industrial life insurance" means either that form
of life insurance under which the premiums are payable monthly or more often if the face
amount of insurance provided in the policy does not exceed $2,500 and the
words "industrial policy" are printed in prominent type on the face of the
policy. Any life company authorized to do business in this State may issue
industrial policies.
(Source: P.A. 82-498.)
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215 ILCS 5/229
(215 ILCS 5/229) (from Ch. 73, par. 841)
Sec. 229.
Standard
Provisions for Industrial Life Insurance. (1) After the effective date
of this Section and any amendments thereto, no policy of industrial life
insurance shall be issued or delivered in this State, unless the same shall
contain in substance the following provisions, and shall be subject to the
other provisions of this section:
(a) A provision that the insured is entitled to a grace period of four
weeks within which the payment of any premium after the first, may be made,
during which period of grace the policy shall continue in full force but in
case the policy becomes a claim during said grace period before the overdue
premiums are paid, the amount of overdue premiums may be deducted in any
settlement under the policy.
(b) A provision that the policy shall contain the entire contract
between the parties, nothing to be incorporated therein by reference to any
constitution, bylaws, rules, application or other writing unless endorsed
upon or attached to the policy.
(c) A provision that the policy shall be incontestable after it shall
have been in force during the lifetime of the insured for a specified
period, not more than two years from its date, except for nonpayment of
premiums and except for violation of the conditions of the policy relating
to naval or military service in time of war and except as to provisions
relating to benefits in the event of total and permanent disability and
those granting additional insurance specifically against death by accident.
(d) A provision that if it shall be found at any time before final
settlement on the policy that the age of the insured (or the age of any
other person considered in determining the premium) has been misstated, the
amount payable under the policy shall be such as the premium would have
purchased at the correct age or ages at the time the policy was issued.
(e) If a participating policy a provision indicating the conditions
under which the company shall annually ascertain and apportion any
divisible surplus accruing on the policy.
(f) A provision for nonforfeiture benefits in accordance with the
requirements of section 229.1 (2) or section 229.2.
(g) If more than one option is provided, a provision as to which of such
options shall apply in the event of the insured's failure to notify the
company of his selection of an option.
(h) A provision for cash surrender values in accordance with the
requirements of section 229.1 (2) or section 229.2.
(i) A provision that the policy may be reinstated, if not surrendered
for its cash value or if the period of extended term insurance has not
expired, within one year from the date of default in payment of premiums
upon presentation of evidence satisfactory to the company of the
insurability of the insured and the payment of arrears of premiums and the
payment or reinstatement of any other indebtedness to the company upon said
policy, with interest on said premiums and indebtedness at a rate not
exceeding six per centum per annum payable annually.
(j) A table showing in figures the nonforfeiture options available
under the policy every year upon default in payment of premiums during at
least the first twenty years of the policy, and a provision that the
company will furnish upon request an extension of such table beyond the
years shown in the policy.
(k) A provision that when a policy shall become a claim by the death of
the insured, settlement shall be made upon receipt of due proof of death
and not later than two months after the receipt of such proof.
(l) Title on the face of the policy clearly and correctly describing its
form.
(m) A provision, or a notice attached to the policy, to the effect that
during a period of 10 days from the date the policy is delivered to the
policy owner it may be surrendered to the insurer together with a written
request for cancellation of the policy, and that in such event the insurer
will refund any premium paid for the policy, including any policy fees or
other charges. The Director
may by rule exempt specific types of policies from this paragraph.
(2) Any of the provisions of subsection (1) or portions thereof not
applicable to nonparticipating or term policies shall to that extent not
be incorporated therein. The provisions of this section shall not apply to
policies issued or granted pursuant to the nonforfeiture provisions
prescribed in clauses (f), (g) and (h) of subsection (1).
(3) Upon proper written request, a named beneficiary shall be designated
in, or be endorsed on, the policy, to receive the benefits thereof on the
death of the insured, and there shall be reserved the power to change the
beneficiary at any time upon proper written request to the company at its
home office, accompanied by the policy for endorsement of the change
thereon by the company. The company shall have the right to refuse to
designate a beneficiary if evidence satisfactory to the company of such
beneficiary's insurable interest in the life of the insured is not
furnished on request. The policy may provide in substance that any payment
thereunder may be made or any nonforfeiture benefit may be granted to the
insured or to the insured's estate or to any relative by blood or
connection by marriage of the insured, or, to the extent of such portion of
any payment under the policy as may reasonably appear to the company to be
due to such person, to any other person equitably entitled thereto by
reason of having incurred expense occasioned by the maintenance or illness
or burial of the insured. If the policy shall be in force at the death of
the insured, the proceeds thereof shall be payable to the named beneficiary
if living, but unless proof of claim in the manner and form required by the
policy, accompanied by delivery of the policy for surrender, has been made
by such beneficiary within fifteen days after the death of the insured,
then upon the expiration of said fifteen days, or if the beneficiary is the
estate of the insured, or is a minor, or is not legally qualified to give a
valid release or dies before the insured, the company may pay to any person
permitted by the policy.
(Source: P.A. 82-594.)
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215 ILCS 5/229.1
(215 ILCS 5/229.1) (from Ch. 73, par. 841.1)
Sec. 229.1.
Non-forfeiture benefits and cash surrender values in policies issued prior
to the operative date of section 229.2.
(1) This subsection shall apply only to policies of life insurance
(other than Industrial life insurance) issued prior to the operative date
of section 229.2 (the Standard Non-forfeiture Law.)
The non-forfeiture benefit referred to in clause (g) of section 224
shall be available to the insured in event of default in premium payments,
after premiums shall have been paid for three years, and shall be a
stipulated form of insurance, effective from the due date of the defaulted
premium, the net value of which shall not be less than the reserve at the
date of default on the policy and on dividend additions thereto, if any,
exclusive of the reserve on account of total and permanent disability and
additional accidental death benefits (the policy to specify the mortality
table, rate of interest and method of valuation adopted for computing such
reserve), less a specified maximum percentage (not more than two and
one-half) of the amount insured by the policy and of existing dividend
additions thereto, if any, and less any existing indebtedness to the
company on or secured by the policy, the exact percentage to be specified
for each year for which required values are not included in the policy; if
more than one option is provided, the policy to specify which of such
options shall apply in the event of the insured's failure to notify the
company of his selection of an option. The policy shall provide that it may
be surrendered to the company at its home office within the period of grace
after the due date of the defaulted premium for a specified cash value not
less than the above prescribed minimum value of the stipulated form of
insurance; and any policy may also provide that the company may defer
payment for not more than six months after the application therefor is
made. Provided that any policy may also contain a provision that in event
of default in a premium payment before such options become available the
reserve on any dividend additions then in force may at the option of the
company be paid in cash or applied as a net premium to the purchase of
paid-up term insurance for any amount not in excess of the face of the
original policy. This subsection shall not apply to term insurance of
twenty years or less, but such term policy shall specify the mortality
table, rate of interest and method of valuation adopted for computing
reserves.
(2) This subsection shall apply only to policies of Industrial life
insurance issued prior to the operative date of section 229.2 (the Standard
Non-forfeiture Law).
The non-forfeiture benefit referred to in clause (f) of section 229,
shall be available in event of default in premium payments after premiums
shall have been paid for five full years, and shall be a stipulated form of
insurance effective from the due date of the defaulted premium, the net
value of which shall not be less than the reserve on the policy at the end
of the last completed quarter of the policy year for which premiums have
been paid, and all dividend additions thereto, if any, exclusive of any
reserve on total and permanent disability and additional accidental death
benefits, (the policy to specify the mortality table, rate of interest and
method of valuation adopted for computing such reserve), less a maximum
percentage (not more than two and one-half per centum) of the amount
insured by the policy and of existing dividend additions thereto, if any,
and less any existing indebtedness to the company on or secured by the
policy. The policy shall also specify said percentage, or other rule of
calculation so as to permit determination of the values, to be specified
for each year for which required values are not included in the policy. The
cash surrender value referred to in clause (h) of section 229, shall be
available upon surrender of the policy to the company at its home office
within the period of grace after the due date of the defaulted premium and
shall be not less than the above prescribed minimum value of the stipulated
form of insurance; provided that the company may defer payment for not more
than six months after the application therefor is made. This subsection
shall not apply to term insurance of twenty years or less but such term
policy shall specify the mortality table, rate of interest and method of
valuation adopted for computing reserves.
(Source: Laws 1943, Vol. 1, p. 824.)
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215 ILCS 5/229.2
(215 ILCS 5/229.2) (from Ch. 73, par. 841.2)
Sec. 229.2. Standard Non-forfeiture Law for Life Insurance. (1) No policy
of life insurance, except as stated in subsection (8),
shall be delivered or issued for delivery in this
State unless it contains in
substance the following provisions or corresponding provisions which in
the opinion of the Director are at least as favorable to the defaulting
or surrendering policyholder and are essentially in compliance with subsection
(7) of this law:
(i) That, in the event of default in any 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 such due date, of such
amount as may be hereinafter specified. In lieu of such
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.
(ii) That, upon surrender of the policy within 60 days after the due
date of any premium payment in default after premiums have been paid for
at least 3 full years in the case of Ordinary insurance or 5 full years
in the case of Industrial insurance, the company will pay, in lieu of
any paid-up nonforfeiture benefit, a cash surrender value of such
amount as may be hereinafter specified.
(iii) That a specified paid-up nonforfeiture benefit
shall become
effective as specified in the policy unless the person entitled to make
such election elects another available option not later than 60 days
after the due date of the premium in default.
(iv) That, if the policy shall have become paid-up by completion of
all premium payments or if it is continued under any 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 within 30 days after any policy
anniversary, a cash surrender value of such amount as may be hereinafter
specified.
(v) 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.
(vi) 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
such 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
paid-up nonforfeiture benefit available under the
policy on any policy
anniversary beyond the last anniversary for which such 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 any cash
surrender value for a period of 6 months after demand therefor with
surrender of the policy.
(2) (i) Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary, whether
or not required by subsection (1), shall be an amount not less than the
excess, if any, of the present value, on such 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 subsections 4, 4(a), 4(b) and 4(c), corresponding
to premiums which
would have fallen due on and after such anniversary, and (ii) the amount
of any indebtedness to the company on the policy.
(ii) For any policy issued on or after the operative date of subsection
4(c), which provides supplemental life insurance or annuity benefits at
the option of the insured for an identifiable additional premium by rider
or supplemental policy provision,
the cash surrender value shall be an amount not less than the sum of the
cash surrender value as determined in paragraph (i) for an otherwise similar
policy issued at the same age without such rider or supplemental policy
provision and the cash surrender value as determined in such paragraph for
a policy which provides only the benefits otherwise provided by such rider
or supplemental policy provision.
(iii) For any family policy issued on or after the operative date of subsection
4(c), which defines a primary insured and provides term insurance on the
life of the spouse of the primary insured expiring before the spouse attains
age 71, the cash surrender value shall be an amount not less than the sum
of the cash surrender value as determined in paragraph (i) for an otherwise
similar policy issued at the same age without such term insurance on the
life of the spouse and the cash surrender value as determined in such paragraph
for a policy which provides only the benefits otherwise provided by such
term insurance on the life of the spouse.
(iv) Any cash surrender
value available within 30 days after any policy anniversary under any
policy paid up by completion of all premium payments or any policy
continued under any paid-up nonforfeiture benefit, whether or not
required by subsection (1), shall be an amount not less than the present
value, on such 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.
(3) Any paid-up nonforfeiture benefit available
under the policy in
the event of default in a premium payment due on any policy anniversary
shall be such that its present value as of such anniversary shall be 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.
(4) This subsection (4) shall not apply to policies issued on or after
the operative date of subsection (4c). Except as provided in the third
paragraph of this subsection,
the adjusted premiums for any policy shall be calculated on an annual
basis and shall be such uniform percentage of the respective premium
specified in the policy for each policy year, excluding any extra
premiums charged because of impairments or special hazards, that the
present value, at the date of issue of the policy, of all such 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) 2% of the
amount of insurance, if the insurance be uniform in amount, or of the
equivalent uniform amount, as hereinafter defined, if the amount of
insurance varies with duration of the policy; (iii) 40% of the adjusted
premium for the first policy year; (iv) 25% of either the adjusted
premium for the first policy year or the adjusted premium for a whole
life policy of the same uniform or equivalent uniform amount with
uniform premiums for the whole of life issued at the same age for the
same amount of insurance, whichever is less. Provided, however, that in
applying the percentages specified in (iii) and (iv) above, no adjusted
premium shall be deemed to exceed 4% of the amount of insurance or
uniform amount equivalent thereto. The date of issue of a policy for the
purpose of this subsection shall be the date as of which the rated age
of the insured is determined.
In the case of a policy providing an amount of insurance varying with
duration of the policy, the equivalent uniform amount thereof for the
purpose of this subsection shall be deemed to be the level amount of
insurance, provided by an otherwise similar policy, containing the same
endowment benefit or benefits, if any, issued at the same age and for
the same term, the amount of which does not vary with duration and the
benefits under which have the same present value at the inception of the
insurance as
the benefits under the policy; provided, however, that in the case of a
policy providing a varying amount of insurance issued on the life of a
child under age 10, the equivalent uniform amount may be computed as
though the amount of insurance provided by the policy prior to the
attainment of age 10 were the amount provided by such policy at age 10.
The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision shall be equal to (a)
the adjusted premiums for an otherwise similar policy issued at the same
age without such term insurance benefits, increased, during the period
for which premiums for such term insurance benefits are payable, by (b)
the adjusted premiums for such term insurance, the foregoing items (a)
and (b) being calculated separately and as specified in the first 2
paragraphs of this subsection except that, for the purposes of (ii),
(iii) and (iv) of the first such paragraph, the amount of insurance or
equivalent uniform amount of insurance used in the calculation of the
adjusted premiums referred to in (b) shall be equal to the excess of the
corresponding amount determined for the entire policy over the amount
used in the calculation of the adjusted premiums in (a).
Except as otherwise provided in subsections (4a) and (4b), all
adjusted premiums and present values referred to in this section shall
for all policies of Ordinary insurance be calculated on the basis of the
Commissioners 1941 Standard Ordinary Mortality Table, provided that for
any category of Ordinary insurance issued on female risks adjusted
premiums and present values may be calculated according to an age not
more than 3 years younger than the actual age of the insured, and such
calculations for all policies of Industrial insurance shall be made on
the basis of the 1941 Standard Industrial Mortality Table. All
calculations shall be made on the basis of the rate of interest, not
exceeding 3 1/2% per annum, specified in the policy for calculating cash
surrender values and paid-up nonforfeiture benefits.
Provided, however,
that in calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than 130% of the
rates of mortality according to such applicable table. Provided,
further, that for insurance issued on a substandard basis, the
calculation of any such adjusted premiums and present values may be
based on such other table of mortality as may be specified by the
company and approved by the Director.
(4a) This subsection (4a) shall not apply to Ordinary policies issued
on or after the operative date of subsection (4c). In the case of Ordinary
policies issued on or after the
operative date of this subsection (4a) as defined herein, all adjusted
premiums and present values referred to in this Section shall be
calculated on the basis of the Commissioners 1958 Standard Ordinary
Mortality Table and the rate of interest specified in the policy for calculating
cash surrender values and
paid-up nonforfeiture benefits, provided that such
rate of interest shall not exceed 3 1/2% per annum except that a rate of
interest not exceeding 5 1/2% per annum may be used for policies issued
on or after September 8, 1977, except that for any single premium
whole life or endowment insurance policy a rate of interest not exceeding
6 1/2% per annum may be used and provided that for any category of
Ordinary insurance issued on female risks, adjusted premiums and present
values may be calculated according to an age not more than 6 years
younger than the actual age of the insured. Provided, however, that in
calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those shown
in the Commissioners 1958 Extended Term Insurance Table. Provided,
however, that for insurance issued on a substandard basis, the
calculation for any such adjusted premiums and present values may be
based on such other table of mortality as may be specified by the
company and approved by the Director. After the effective date of this
subsection (4a), any company may file with the Director written notice
of its election to comply with the provisions of this subsection after a
specified date before January 1, 1966. After the filing of such notice,
then upon such specified date (which shall be the operative date of this
subsection for such company), this subsection shall become operative
with respect to the Ordinary policies thereafter issued by such company.
If a company makes no such election, the operative date of this
subsection for such company shall be January 1, 1966.
(4b) This subsection (4b) shall not apply to Industrial policies issued
on or after the operative date of subsection (4c). In the case of Industrial
policies issued on or after the
operative date of this subsection (4b) as defined herein, all adjusted
premiums and present values referred to in this Section shall be
calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table and the rate of interest specified in the policy for calculating
cash surrender values and
paid-up nonforfeiture benefits, provided that such
rate of interest shall not exceed 3 1/2% per annum except that a rate of
interest not exceeding
5 1/2% per annum may be used for policies issued on or after September
8, 1977, except
that for any single premium whole life or endowment insurance policy a rate
of interest not exceeding 6 1/2% per annum may be used. Provided, however,
that in calculating
the present value of any paid-up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit,
the rates of
mortality assumed may be not more than those shown in the Commissioners
1961 Industrial Extended Term Insurance Table. Provided, further, that
for insurance issued on a substandard basis, the calculations of any
such adjusted premiums and present values may be based on such other
table of mortality as may be specified by the company and approved by
the Director. After the effective date of this subsection (4b), any
company may file with the Director a written notice of its election to
comply with the provisions of this subsection after a specified date
before January 1, 1968. After the filing of such notice, then upon such
specified date (which shall be the operative date of this subsection for
such company), this subsection shall become operative with respect to
the Industrial policies thereafter issued by such company. If a company
makes no such election, the operative date of this subsection for such
company shall be January 1, 1968.
(4c)(a) This subsection shall apply to all policies issued on or after
its operative date. Except as provided in paragraph (g), the adjusted premiums
for any 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 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 value and paid-up nonforfeiture benefits of the policy,
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% 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% of the nonforfeiture net level premium as hereinafter defined.
In applying the percentage specified in (iii), however,
no nonforfeiture net level premium shall exceed 4% 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 purpose of this subsection is the date
as of which the rated age of the insured is determined.
(b) The nonforfeiture net level premium equals 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 one per annum payable on the date of issue of the policy
and on each anniversary of such policy on which a premium falls due.
(c) In the case of a policy which causes, on a basis guaranteed in such
policy, unscheduled changes in benefits or premiums, or which provides an
option for changes in benefits or premiums other than a change to a new
policy, 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 such policy. At the time of any such
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
such policy immediately after the change.
(d) Except as otherwise provided in paragraph (g), the recalculated future
adjusted premiums for any policy shall be such 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 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
such future adjusted premiums shall be equal to the excess of (A) the sum
of (i) the then present value of the then future guaranteed benefits provided
for by the policy and (ii) the additional expense allowance, if any, over
(B) the then cash surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
(e) The additional expense allowance at the time of the change to the
newly defined benefits or premiums shall be the sum of
(i) 1% 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 prior to 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% of the increase, if positive, in
the nonforfeiture net level premium.
(f) The recalculated nonforfeiture net level premium equals the result
obtained by dividing X by Y, where
(i) X equals the sum of
(A) the nonforfeiture net level premium applicable prior to the change
times the present value of an annuity of one 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
(B) the present value of the increase in future guaranteed benefits provided
for by the policy; and
(ii) Y equals the present value of an annuity of one per annum payable
on each anniversary of the policy on or subsequent to the date of change
on which a premium falls due.
(g) Notwithstanding any other provisions of this subsection 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, such policy has
the same tabular mortality cost as an otherwise similar policy issued on
the standard basis which provides higher uniform amounts of insurance, adjusted
premiums and present values for such substandard policy may be calculated
as if it were issued to provide such higher uniform amounts of insurance
on the standard basis.
(h) All adjusted premiums and present values referred to in this Section
shall for all policies of ordinary insurance be calculated on the basis
of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election
of the company for any one or more specified plans of life
insurance, the Commissioners 1980 Standard Ordinary Mortality Table with
Ten-Year Select Mortality Factors. All adjusted premiums and present values
referred to in this Section shall for all policies of Industrial insurance
be calculated on the basis of the Commissioners 1961 Standard Industrial
Mortality Table. All adjusted premiums and present values referred to in
this Section for all policies issued in a particular calendar year shall
be calculated on the basis of a rate of interest not exceeding
the nonforfeiture interest rate as defined in this subsection for policies
issued in that calendar year. The provisions of this paragraph are subject
to the provisions set forth in subparagraphs (i) through (vii).
(i) 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 defined in this subsection,
for policies issued in the immediately preceding calendar year.
(ii) Under any paid-up nonforfeiture benefit, including any paid-up dividend
additions, any cash surrender value available, whether or not required by
subsection (1), shall be calculated on the basis of the mortality table
and rate of interest used in determining the amount of such paid-up nonforfeiture
benefit and paid-up dividend additions, if any.
(iii) A company may calculate the amount of any guaranteed paid-up nonforfeiture
benefit, including any paid-up additions under the policy, on the basis
of an interest rate no lower than that specified in the policy for calculating
cash surrender values.
(iv) In calculating the present value of any paid-up term insurance with
an accompanying pure endowment, if any, offered as a nonforfeiture benefit,
the rates of mortality assumed may be not more than those shown in the Commissioners
1980 Extended Term Insurance Table for policies of ordinary insurance and
not more than the Commissioner 1961 Industrial Extended Term Insurance Table
for policies of industrial insurance.
(v) For insurance issued on a substandard basis, the calculation of any
such adjusted premiums and present values may be based on appropriated modifications
of the aforementioned tables.
(vi) For policies issued prior to the operative date of the Valuation Manual, any Commissioners Standard Mortality Table adopted after 1980 by the National Association
of Insurance Commissioners and approved by regulations promulgated
by the Director for use in determining the minimum nonforfeiture standard
may be substituted for the Commissioners 1980 Standard Ordinary Mortality
Table with or without Ten-Year Select Mortality Factors or for the Commissioners
1980 Extended Term Insurance Table.
For policies issued on or after the operative date of the Valuation Manual, the Valuation Manual shall provide the Commissioners Standard Ordinary 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 Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table. If the Director approves by regulation any Commissioners Standard Ordinary Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (vii) For policies issued prior to the operative date of the Valuation Manual, any Commissioners Standard Industrial Mortality Table adopted after 1980 by the National
Association of Insurance Commissioners and approved by regulations promulgated
by the Director for use in determining the minimum nonforfeiture standard
may be substituted for the Commissioners 1961 Standard Industrial Mortality
Table or the Commissioners 1961 Industrial Extended Term Insurance Table.
For policies issued on or after the operative date of the Valuation Manual, the Valuation Manual shall provide the Commissioners Standard Industrial 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 Director approves by regulation any Commissioners Standard Industrial Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (i) The nonforfeiture interest rate is defined as follows: (i) For policies issued prior to the operative date | | of the Valuation Manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be equal to 125% of the calendar year statutory valuation interest rate for such policy, as defined in the Standard Valuation Law, rounded to the nearest .25%, provided, however, that the nonforfeiture interest rate shall not be less than 4.00%.
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(ii) For policies issued on and after the operative
| | date of the Valuation Manual, the nonforfeiture interest rate per annum for any policy issued in a particular calendar year shall be provided by the Valuation Manual.
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| (j) Notwithstanding any other provision in this Code to the contrary,
any refiling of nonforfeiture values or their methods of computation for
any 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 any other provisions of that policy form.
(k) After the effective date of this subsection, any company may, with
respect to any category of insurance, file with the Director a written notice
of its election to comply with the provisions of this subsection after a
specified date before January 1, 1989. That date
shall be the operative date of this subsection for that category of insurance
for such company. If
a company makes no such election, the operative date of this subsection
for that category of insurance issued by such company shall be January 1, 1989.
(5) In the case of any plan of life insurance which provides for future
premium determination, the amounts of which are to be determined by the
insurance company based on then estimates of future experience, or in the
case of any plan of life insurance which is of such a nature that minimum
values cannot be determined by the methods described in subsections (1),
(2), (3), (4), (4a), (4b) or (4c), then
(a) the Director shall satisfy himself that the benefits provided under
such plan are substantially as favorable to policyholders and insured parties
as the minimum benefits otherwise required by subsections (1), (2), (3),
(4), (4a), (4b) or (4c);
(b) the Director shall satisfy himself that the benefits and the pattern
of premiums of that plan are not such as to mislead prospective policyholders
or insured parties; and
(c) the cash surrender values and paid-up nonforfeiture benefits provided
by such plan shall not be less than the minimum values and benefits computed
by a method consistent with the principles of this Standard Nonforfeiture
Law for Life Insurance, as determined by regulations promulgated by the Director.
(6) Any cash surrender value and any 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 (2), (3), (4), (4a), (4b)
and (4c) may be
calculated upon the assumption that any 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 be not less than the amounts
used to provide such additions. Notwithstanding the provisions of
subsection (2), 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 on the life of a child or on the lives of children provided in
a policy on the life of a parent of the child, if such term insurance
expires before the child's age is 26, is uniform in amount after the
child's age is one, 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.
(7) This subsection shall apply to all policies issued on or after January
1, 1987. Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary shall be in
an amount which does not differ by more than .2% 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 (a) the greater of zero and the basic cash value hereinafter specified
and (b) 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 equals the present value, on such 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 hereinafter defined,
corresponding to premiums which would have fallen due on and after such
anniversary. The effects on the basic cash value of supplemental life insurance
or annuity benefits or of family coverage, as described in subsection (2)
or (4), whichever is applicable, shall, however, be the same as are the
effects specified in subsection (2) or (4), whichever is applicable, on
the cash surrender values defined in that subsection.
The nonforfeiture factor for each policy year equals a percentage of the
adjusted premium for the policy year, as defined in subsection (4) or (4c),
whichever is applicable. Except as is required by the next succeeding sentence
of this paragraph, such percentage
(a) shall be the same percentage for each policy year between the second
policy anniversary and the later of (i) the fifth policy anniversary and
(ii) 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% 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
(b) shall be such that no percentage after the later of the 2 policy anniversaries
specified in the preceding item (a) may apply to fewer than 5 consecutive policy years.
No basic cash value may be less than the value which would be obtained
if the adjusted premiums for the policy, as defined in subsection (4) or
(4c), whichever is applicable, were substituted for the nonforfeiture factors
in the calculation of the basic cash value.
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 those used in accordance with the other
subsections of this law. The cash surrender values referred to in this
subsection shall include any 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 any 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
1, 2, 3, 4c, and 6. The amounts of any cash surrender values and of any
paid-up nonforfeiture benefits granted in connection with additional benefits
such as those listed as items (i) through (vi) in subsection (6) shall conform
with the principles of this subsection (7).
(8) This Section shall not apply to any of the following:
(a) reinsurance,
(b) group insurance,
(c) a pure endowment,
(d) an annuity or reversionary annuity contract,
(e) a term policy of uniform amount, which provides no guaranteed nonforfeiture
or endowment benefits, or renewal thereof, of 20 years or
less expiring before age 71, for which uniform premiums are payable
during the entire term of the policy,
(f) a term policy of
decreasing amount, which provides no guaranteed nonforfeiture or endowment
benefits, on which each adjusted premium, calculated as
specified in subsections (4), (4a), (4b) and (4c), 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,
(g) a policy, which provides no guaranteed nonforfeiture or endowment
benefits, for which no cash surrender value, if any, or present value of
any paid-up nonforfeiture benefit, at the beginning of any policy year,
calculated as specified in subsections (2), (3), (4), (4a), (4b) and (4c),
exceeds 2.5% of the amount of insurance at the beginning of the same policy year,
(h) any policy
which shall be delivered outside this State through an agent or other
representative of the company issuing the policy.
For purposes of determining the applicability of this Section, the age
of expiry for a joint term life insurance policy shall be the age of expiry
of the oldest life.
(9) For the purposes of this Section:
"Operative date of the Valuation Manual" means the January 1 of the first calendar year that the Valuation Manual is effective.
"Valuation Manual" has the same meaning as set forth in Section 223 of this Code.
(Source: P.A. 99-162, eff. 1-1-16 .)
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215 ILCS 5/229.3
(215 ILCS 5/229.3) (from Ch. 73, par. 841.3)
Sec. 229.3.
Loan provisions in policies.
In the case of those policies issued prior to the operative date of
Section 229.2 (the Standard Non-forfeiture Law) the loan value referred
to in clause (f) of section 224 shall be the reserve at the end of the
current policy year on the policy and on the dividend additions thereto, if
any, exclusive of the reserve on account of total and permanent disability
and additional accidental death benefits, less a specified maximum
percentage (not more than two and one-half) of the amount insured by the
policy and of any dividend additions thereto (the policy to specify the
mortality table, rate of interest and method of valuation adopted for
computing such reserve), the exact percentage to be specified for each year
for which required values are not included in the policy. The policy may
also provide that such loan may be deferred for not exceeding six months
after the application therefor is made.
(2) In the case of policies issued on or after the operative date of
Section 229.2 (the Standard Non-forfeiture Law) the loan value referred to
in clause (f) of section 224 shall be the cash surrender value at the end
of the current policy year as required by section 229.2. The company shall
reserve the right to defer such loan, except when made to pay premiums, for
six months after application therefor is made.
(Source: Laws 1943, vol. 1, p. 824 .)
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215 ILCS 5/229.4
(215 ILCS 5/229.4) (from Ch. 73, par. 841.4)
Sec. 229.4. (Repealed). (Source: P.A. 93-873, eff. 8-6-04. Repealed internally, eff. 7-1-06.)
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215 ILCS 5/229.4a (215 ILCS 5/229.4a)
Sec. 229.4a. Standard Nonforfeiture Law for Individual Deferred
Annuities. (1)
Title.
This Section shall be known as the Standard Nonforfeiture Law for Individual Deferred Annuities. (2) Applicability.
This Section shall not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract which shall be delivered outside this State through an agent or other representative of the company issuing the contract. (3) Nonforfeiture Requirements. (A) In the case of contracts issued on or after the | | operative date of this Section as defined in subsection (13), no contract of annuity, except as stated in subsection (2), shall be delivered or issued for delivery in this State unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the Director of Insurance are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract:
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| (i) That upon cessation of payment of
| | considerations under a contract, or upon the written request of the contract owner, the company shall grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (5), (6), (7), (8), and (10);
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| (ii) If a contract provides for a lump sum
| | settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company shall pay in lieu of a paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (5), (6), (8), and (10). The company may reserve the right to defer the payment of the cash surrender benefit for a period not to exceed 6 months after demand therefor with surrender of the contract after making written request and receiving written approval of the Director. The request shall address the necessity and equitability to all policyholders of the deferral;
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| (iii) A statement of the mortality table, if any,
| | and interest rates used calculating any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of the benefits; and
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| (iv) A statement that any paid-up annuity, cash
| | surrender, or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which the benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract.
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| (B) Notwithstanding the requirements of this Section,
| | a deferred annuity contract may provide that if no considerations have been received under a contract for a period of 2 full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from prior considerations paid would be less than $20 monthly, the company may at its option terminate the contract by payment in cash of the then present value of the portion of the paid-up annuity benefit, calculated on the basis on the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by this payment shall be relieved of any further obligation under the contract.
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| (4) Minimum values. The minimum values as specified in subsections (5), (6), (7), (8), and (10) of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection.
(A)(i) The minimum nonforfeiture amount at any time
| | at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at rates of interest as indicated in subdivision (4)(B) of the net considerations (as hereinafter defined) paid prior to such time, decreased by the sum of paragraphs (a) through (d) below:
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| (a) Any prior withdrawals from or partial
| | surrenders of the contract accumulated at rates of interest as indicated in subdivision (4)(B);
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| (b) An annual contract charge of $50, accumulated
| | at rates of interest as indicated in subdivision (4)(B);
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| (c) Any premium tax paid by the company for the
| | contract, accumulated at rates of interest as indicated in subdivision (4)(B); and
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| (d) The amount of any indebtedness to the company
| | on the contract, including interest due and accrued.
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| (ii) The net considerations for a given contract year
| | used to define the minimum nonforfeiture amount shall be an amount equal to 87.5% of the gross considerations, credited to the contract during that contract year.
|
| (B) The interest rate used in determining minimum
| | nonforfeiture amounts shall be an annual rate of interest determined as the lesser of 3% per annum and the following, which shall be specified in the contract if the interest rate will be reset:
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| (i) The 5-year Constant Maturity Treasury Rate
| | reported by the Federal Reserve as of a date, or average over a period, rounded to the nearest 1/20th of one percent, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under subdivision (4)(B)(iv);
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| (ii) Reduced by 125 basis points;
(iii) Where the resulting interest rate is not
| | (iv) The interest rate shall apply for an initial
| | period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the 5-year Constant Maturity Treasury Rate to be used at each redetermination date.
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| (C) During the period or term that a contract
| | provides substantive participation in an equity indexed benefit, it may increase the reduction described in subdivision (4)(B)(ii) above by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each redetermination date thereafter, of the additional reduction shall not exceed market value of the benefit. The Director may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. Lacking such a demonstration that is acceptable to the Director, the Director may disallow or limit the additional reduction.
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| (D) The Director may adopt rules to implement the
| | provisions of subdivision (4)(C) and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts that the Director determines adjustments are justified.
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| (5) Computation of Present Value.
Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Present value shall be computed using the mortality table, if any, and the interest rates specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
(6) Calculation of Cash Surrender Value.
For contracts that provide cash surrender benefits, the cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit that would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than 1% higher than the interest rate specified in the contract for accumulating the net considerations to determine maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
(7) Calculation of Paid-up Annuity Benefits.
For contracts that do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is
surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine maturity value, and increased by any additional amounts credited by the company to the contract. For contracts that do not provide any death benefits prior to the commencement of any annuity payments, present values shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.
(8) Maturity Date.
For the purpose of determining the benefits calculated under subsections (6) and (7), in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.
(9) Disclosure of Limited Death Benefits.
A contract that does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not
provided.
(10) Inclusion of Lapse of Time Considerations.
Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
(11) Proration of Values; Additional Benefits.
For a contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (5), (6), (7), (8), and (10), additional benefits payable in the event of total and permanent disability, as reversionary annuity or deferred reversionary annuity benefits, or as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts,
paid-up annuity, cash surrender, and death benefits that may be required under this Section. The inclusion of such benefits shall not be required in any paid-up benefits, unless the additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits.
(12) Rules. The Director may adopt rules to implement the provisions of this Section.
(13) Effective Date. After August 6, 2004 (the effective date of Public Act 93-873), a company may elect to apply its provisions to annuity
contracts on a contract form-by-contract form basis before July 1, 2006. In all other instances, this Section shall become operative with respect to annuity contracts issued by the company on or after July 1, 2006.
(14) (Blank).
(Source: P.A. 102-775, eff. 5-13-22; 103-154, eff. 6-30-23.)
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215 ILCS 5/229.5
(215 ILCS 5/229.5) (from Ch. 73, par. 841.5)
Sec. 229.5.
Policy loan interest rates.
(a) As used in this Section,
unless the context requires otherwise:
(1) "Policy" includes certificates issued by a fraternal benefit society
and annuity contracts which provide for policy loans.
(2) "Policy loan" includes any premium loan made under a policy to pay
one or more premiums that were not paid to the life insurer as they became due.
(3) "Policyholder" includes the owner of the policy or the person designated
to pay premiums as shown on the records of the life insurer.
(4) "Published Monthly Average" means:
(i) Moody's Corporate Bond Yield Average - Monthly Average Corporates
as published by Moody's Investors Service, Inc., or any successor thereto; or
(ii) In the event that Moody's Corporate Bond Yield Average - Monthly Average
Corporates is no longer published, a substantially similar average, established
by regulation issued by the Director.
(b) Maximum rate of interest on policy loans.
(1) Policies issued on or after the effective date of this amendatory
Act of 1981 shall provide for policy loan interest rates as follows:
(i) A provision permitting a maximum interest rate of not more than 8% per annum; or
(ii) A provision permitting an adjustable maximum interest rate established
from time to time by the life insurer as permitted by law.
(2) The rate of interest charged on a policy loan made under subsection
(1)(ii) shall not exceed the higher of the following:
(i) The Published Monthly Average for the calendar month ending 2 months
before the date on which the rate is determined; or
(ii) The rate used to compute the cash surrender values under the policy
during the applicable period plus 1% per annum.
(3) If the maximum rate of interest is determined pursuant to clause
(ii) of paragraph (1) of this subsection (b), the policy shall contain a
provision setting forth the frequency at which the rate is to be determined
for that policy.
(4) The maximum rate for each policy must be determined at regular intervals
at least once every 12 months, but not more frequently than once in any
3 month period. At the intervals specified in the policy:
(i) The rate being charged may be increased whenever such change as determined
under paragraph (2) of this subsection (b) would increase that rate by 1/2%
or more per annum.
(ii) The rate being charged must be reduced whenever such reduction as
determined under paragraph (2) of this subsection (b) would decrease that
rate by 1/2% or more per annum.
(5) The life insurer shall:
(i) notify the policyholder at the time a cash loan is made of the initial
rate of interest on the loan;
(ii) notify the policyholder with respect to premium loans of the initial
rate of interest on the loan as soon as it is reasonably practical to do
so after making the initial loan. Notice need not be given to the policyholder
when a further premium loan is added, except as provided in (iii) below;
(iii) send to policyholders with loans a reasonable advance notice of
any increase in the rate; and
(iv) include in the notices required above the substance of the pertinent
provisions of paragraph (1) and (3) of this subsection (b).
(6) The loan value of the policy shall be determined in accordance with
Section 229.3, but no policy shall terminate in a policy year as the sole
result of change in the interest rate during that policy year, and the
life insurer shall maintain coverage during that policy year until such
time as it would otherwise have terminated if there had been no change in
the interest rate during that policy year.
(7) The substance of the pertinent provisions of paragraphs (1) and (3)
of this subsection (b) shall be set forth in the policies to which they apply.
(8) For purposes of this Section, the rate of interest on policy loans
permitted under this Section includes the interest rate charged on
reinstatement
of policy loans for the period during and after any lapse of a policy.
(9) No other provisions of law shall apply to policy loan interest rates
unless made specifically applicable to such rates.
(c) The provisions of this Section shall not apply to any insurance contract
issued before the effective date of this amendatory Act of 1981, unless the
policyholder agrees in writing to the applicability of such provisions.
(Source: P.A. 83-1362.)
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215 ILCS 5/230.1
(215 ILCS 5/230.1) (from Ch. 73, par. 842.1)
Sec. 230.1.
Group Insurance Definition.
Except as provided in Section
230.2, no policy of group life insurance shall be delivered in this State
unless it conforms to one of the following descriptions:
(A) A policy issued to an employer, or to the trustees of a fund established
by an employer, which employer or trustees shall be deemed the policyholder,
to insure employees of the employer for the benefit of persons other than the
employer, subject to the following requirements:
(1) The employees eligible for insurance under the policy shall be all
of the employees of the employer, or all of any class or classes thereof.
The policy may provide that the term "employees" shall include the employees
of one or more subsidiary corporations, and the employees, individual proprietors,
and partners of one or more affiliated corporations, proprietorships or
partnerships if the business of the employer and of such affiliated corporations,
proprietorships, or partnerships is under common control. The policy may
provide that the term "employees" shall include the individual proprietor
or partners if the employer is an individual proprietorship or partnership.
The policy may provide that the term "employees" shall include retired employees
and directors of a corporate employer. A policy issued to insure the employees
of a public body may provide that the term "employees" shall include elected
or appointed officials.
(2) The premium for the policy shall be paid either from the employer's
funds or from funds contributed by the insured employees, or from both.
Except as provided in paragraph (3) of this subsection (A), a policy on
which no part of the premium is to be derived from funds contributed by
the insured employees must insure all eligible employees, except those who
reject such coverage in writing.
(3) An insurer may exclude or limit the coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(B) A policy issued to a creditor or its parent holding company or to
a trustee or trustees or agent designated by two or more creditors, which
creditor, holding company, affiliate, trustee, trustees, or agent shall
be deemed the policyholder, to insure debtors of the creditor, or creditors,
subject to the following requirements:
(1) The debtors eligible for insurance under the policy shall be all of
the debtors of the creditor or creditors, or all of any class or classes
thereof. The policy may provide that the term "debtors" shall include (i)
borrowers of money or purchasers or lessees of goods, services, or property
for which payment is arranged through a credit transaction; (ii) the debtors
of one or more subsidiary corporations; and (iii) the debtors of one or
more affiliated corporations, proprietorships, or partnerships if the business
of the policyholder and of such affiliated corporations, proprietorships,
or partnerships is under common control.
(2) The premium for the policy shall be paid either from the creditor's
funds, or from charges collected from the insured debtors, or from both. Except
as provided in paragraph (3) of this subsection (B), a policy on which no
part of the premium is to be derived from the funds contributed by insured
debtors specifically for their insurance must insure all eligible debtors.
(3) An insurer may exclude any debtors as to whom evidence of individual
insurability is not satisfactory to the insurer.
(4) The amount of the insurance on the life of any debtor shall at no
time exceed the greater of the scheduled or actual amount of unpaid indebtedness
to the creditor.
(5) The insurance may be payable to the creditor or any successor to the
right, title, and interest of the creditor. Such payment shall reduce or
extinguish the unpaid indebtedness of the debtor to the extent of such payment.
Whenever the amount of insurance payable exceeds the amount of outstanding
indebtedness the excess benefit shall be payable to the person otherwise contractually
or legally entitled thereto; if there be no person determined to be so entitled,
such excess shall be paid to the estate of the insured person.
(6) Notwithstanding the provisions of the above paragraphs, insurance
on agricultural credit transaction commitments may be written up to the
amount of the loan commitment on a non-decreasing or level term plan. Insurance
on educational credit transaction commitments may be written up to the amount
of the loan commitment less the amount of any repayments made on the loan.
(C) A policy issued to a labor union, or similar employee organization,
which shall be deemed to be the policyholder, to insure members of such
union or organization for the benefit of persons other than the union or
organization or any of its officials, representatives, or agents, subject
to the following requirements:
(1) The members eligible for insurance under the policy shall be all of
the members of the union or organization, or all of any class or classes thereof.
(2) The premium for the policy shall be paid either from funds of the
union or organization, or from the funds contributed by the insured members
specifically for their insurance, or from both. Except as provided in paragraph
(3) of this subsection (C), a policy on which no part of the premium is
to be derived from funds contributed by the insured members specifically
for their insurance must insure all eligible members, except those who reject
such coverage in writing.
(3) An insurer may exclude or limit the coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(D) A policy issued to a trust or to the trustees of a fund established
by two or more employers, or by one or more labor unions or similar employee
organizations, or by one or more employers and one or more labor unions
or similar employee organizations, which trust or trustees shall be deemed
the policyholder, to insure employees of the employers or members of the
unions or organizations for the benefit of persons other than the employers
or the unions or organizations, subject to the following requirements:
(1) The persons eligible for insurance shall be all employees of the employers
or all of the members of the unions or organizations, or all of any class
or classes thereof. The policy may provide that the term "employees" shall
include retired employees, the individual proprietor or partners if an employer
is an individual proprietorship or a partnership, and directors of a corporate
employer. The policy may provide that the term "employees" shall include
the trustees or their employees, or both, if their duties are principally
connected with such trusteeship.
(2) The premium for the policy shall be paid from funds contributed by
the employer or employers of the insured persons, or by the union or unions
or similar employee organizations, or by both, or from funds contributed
by the insured persons or from both the insured persons and the employer
or union or similar employee organizations. Except as provided in paragraph
(3) of this subsection
(D), a policy on which no part of the premium is to be derived from funds
contributed by the insured persons
specifically for their insurance must insure all eligible persons, except
those who reject such coverage in writing.
(3) An insurer may exclude or limit the coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(E) A policy issued to an association or to a trust or to the trustees
of a fund established, created, or maintained for the benefit of members
of one or more associations. The association or associations shall have
at the outset a minimum of 100 persons; shall have been organized and maintained
in good faith for purposes other than that of obtaining insurance; shall
have been in active existence for at least two years; and shall have a constitution
and by-laws which provides that (i) the association or associations hold
regular meetings not less than annually to further purposes of the members,
(ii) except for credit unions, the association or associations collect dues
or solicit contributions from members, and (iii) the members have voting
privileges and representation on the governing board and committees. The
policy shall be subject to the following requirements:
(1) The policy may insure members of such association or associations,
employees thereof or employees of members, or one or more of the preceding
or all of any class or classes thereof for the benefit of persons other
than the employee's employer.
(2) The premium for the policy shall be paid from funds contributed by
the association or associations, or by employer members, or by both, or
from funds contributed by the covered persons or from both the covered persons
and the association, associations, or employer members.
(3) Except as provided in paragraph (4) of this subsection (E), a policy
on which no part of the premium is to be derived from funds contributed
by the covered persons specifically for the insurance must insure all eligible
persons, except those who reject such coverage in writing.
(4) An insurer may exclude or limit the coverage of any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(Source: P.A. 83-1465.)
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215 ILCS 5/230.2
(215 ILCS 5/230.2) (from Ch. 73, par. 842.2)
Sec. 230.2.
Limits of Group Life Insurance.
Group life insurance offered
to a resident of this State under a group life insurance policy issued to
a group other than one described in Section 230.1 shall be subject to the
following requirements:
(A) No such group life insurance policy shall be delivered in this State
unless the Director finds that:
(1) The issuance of such group policy is not contrary to the best interest
of the public;
(2) The issuance of the group policy would be actuarially sound;
(3) The issuance of the group policy would result in economies of acquisition
or administration; and
(4) The benefits are reasonable in relation to the premiums charged.
(B) No such group life insurance coverage may be offered in this State
by an insurer under a policy issued in another State unless this State or
another State having requirements substantially similar to those contained
in subsection (A) of this Section has made a determination that such requirements
have been met.
(C) The premium for the policy shall be paid either from the policyholder's
funds or from funds contributed by the covered persons, or from both.
(D) An insurer may exclude or limit coverage on any person as to whom
evidence of individual insurability is not satisfactory to the insurer.
(Source: P.A. 83-598.)
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215 ILCS 5/230.3
(215 ILCS 5/230.3) (from Ch. 73, par. 842.3)
Sec. 230.3.
Dependent Group Life Insurance.
Except for a policy issued
under subsection (B) of Section 230.1, a group life insurance policy may
be extended to insure the employees or members against loss due to the death
of their spouses and dependent children, or any class or classes thereof,
subject to the following:
(A) The premium for the insurance shall be paid either from funds
contributed by the employer, union, association, or other person to whom the
policy has been issued, or from funds contributed by the covered persons, or
from both. Except as provided in subsection (B) of this Section, a policy on
which no part of the premium for the spouse's and dependent child's coverage is
to be derived from funds contributed by the covered persons must insure all
eligible employees or members with respect to their spouses and dependent
children, or any class or classes thereof.
(B) An insurer may exclude or limit the coverage on any spouse or dependent
child as to whom evidence of individual insurability is not satisfactory to the
insurer.
(C) The amount of insurance for any covered spouse or dependent child under
the policy may not exceed 100% of the amount of insurance for which the
employee or member is insured.
(Source: P.A. 88-400.)
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215 ILCS 5/231.1
(215 ILCS 5/231.1) (from Ch. 73, par. 843.1)
Sec. 231.1. Group Life Insurance Standard Provision. No policy of group
life insurance shall be delivered in this State unless it contains in substance
the following provisions, or provisions which in the opinion of the Director
are more favorable to the persons insured, or at least as favorable to the
persons insured and more favorable to the policyholder, provided, however,
(a) that provisions (F) to (K) inclusive shall not apply to policies insuring
the lives of debtors; (b) that the standard provisions
required for individual life insurance policies shall not apply to group
life insurance policies; and (c) that if the group life insurance policy
is on a plan of insurance other than the term plan, it shall contain a nonforfeiture
provision which in the opinion of the Director is equitable to the insured
persons and to the policyholder, but nothing herein shall be construed to
require that group life insurance policies contain the same nonforfeiture
provisions as are required for individual life insurance policies:
(A) A provision that the policyholder is entitled to a grace period of
31 days for the payment of any premium due except the first, during which
grace period the death benefit coverage shall continue in force, unless
the policyholder shall have given the insurer written notice of discontinuance
in advance of the date of discontinuance and in accordance with the terms
of the policy. The policy may provide that the policyholder shall be liable
to the insurer for the payment of a pro rata premium for the time the policy
was in force during such grace period.
(B) A provision that validity of the policy shall not be contested, except
for nonpayment of premiums, after it has been in force for two years from
its date of issue; and that no statement made by any person insured under
the policy relating to his insurability shall be used in contesting the
validity of the insurance with respect to which such statement was made
after such insurance has been in force prior to the contest for a period
of two years during such person's lifetime nor unless it is contained in
a written instrument signed by him; provided, however, that no such provision
shall preclude the assertion at any time of defenses based upon provisions
in the policy which relate to eligibility for coverage.
(C) A provision that a copy of the application, if any, of the policyholder
shall be attached to the policy when issued, and that all statements made by
the policyholder shall be deemed representations and not warranties, and
that no statement made by any person insured shall be used in any contest
unless a copy of the instrument containing the statement
is or has been furnished to such person or, in the event of death or incapacity
of the insured person, to his beneficiary or personal representative.
(D) A provision setting forth the conditions, if any, under which the
insurer reserves the right to require a person eligible for insurance to
furnish evidence of individual insurability satisfactory to the insurer
as a condition to part or all of his coverage.
(E) A provision specifying an equitable adjustment of premiums or of benefits
or of both to be made in the event the age of a person insured has been
misstated, such provision to contain a clear statement of the method of
adjustment to be made.
(F) A provision that any sum becoming due by reason of the death of the
person insured shall be payable to the beneficiary designated by the person
insured, except that where the policy contains conditions pertaining to
family status the beneficiary may be the family member specified by the
policy terms, subject to the provisions of the policy in the event there
is no designated beneficiary, as to all or any part of such sum, living
at the death of the person insured, and subject to any right reserved by
the insurer in the policy and set forth in the certificate to pay at its
option a part of such sum not exceeding $2,000 to any person appearing to
the insurer to be equitably entitled thereto by reason of having incurred
funeral or other expenses incident to the last illness or death of the person insured.
(G) A provision that the insurer will issue to the policyholder for delivery
to each person insured a certificate setting forth a statement as to the
insurance protection to which he is entitled, to whom the insurance benefits
are payable, a statement as to any dependent's coverage included in such
certificate, and the rights and conditions set forth in provisions (H),
(I), (J) and (K) following.
(H) A provision that if the insurance, or any portion of it, on a person
covered under the policy or on the dependent of a person covered, ceases
because of termination of employment or of membership in the class or classes
eligible for coverage under the policy, such person shall be entitled to
have issued to him by the insurer, without evidence of insurability, an
individual policy of life insurance without disability or other supplementary
benefits, unless such right to convert such coverage was provided for
in the group policy and is applied for in the application for conversion,
provided that an application for the individual policy shall be made,
and the first premium paid to the insurer, within 31 days after such termination,
and provided further that:
(1) the individual policy may, at the option of such | | person, be on any one of the forms then customarily issued by the insurer at the age and for the amount applied for, except that the group policy may exclude the option to elect term insurance;
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(2) the individual policy shall be in an amount equal
| | to, unless such person chooses to elect a lesser amount, the amount of life insurance which ceases because of such termination, less the amount of any life insurance for which such person becomes eligible under the same or any other group policy within 31 days after such termination, provided that any amount of insurance which shall have matured on or before the date of such termination as an endowment payable to the person insured, whether in one sum or in installments or in the form of an annuity, shall not, for the purposes of this provision, be included in the amount which is considered to cease because of such termination; and
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(3) the premium on the individual policy shall be at
| | the insurer's then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to such person's age attained on the effective date of the individual policy.
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(4) If any individual insured under a group life
| | insurance policy becomes entitled under the terms of such policy to have an individual policy of life insurance issued and if such individual is not given notice of the existence of such right at least 15 days prior to the expiration date of such period, then in such event the individual shall have an additional period within which to exercise such right, but nothing herein contained shall be construed to continue any insurance beyond the period provided in such policy. This additional period shall expire 15 days next after the individual is given such notice but in no event shall such additional period extend beyond 60 days next after the expiration date of the period provided in such policy. Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder shall constitute notice for the purpose of this Section.
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Subject to the same conditions set forth above the conversion privilege
shall be available (i) to a surviving dependent, if any, at the death of
the employee or member, with respect to the coverage under the group policy
which terminates by reason of such death and (ii) to the dependent of the
employee or member upon termination of coverage of the dependent, while
the employee or member remains under the group policy, by reason of the
dependent ceasing to be a qualified family member under the group policy.
(I) A provision, except in the case of a policy described in paragraph
(B) of Section 230.1, that the termination of the employment of an employee
or the membership of a member shall not terminate the insurance of such
employee or member under the group policy until the expiration of such period
for which the premium for such employee or member has been paid, not exceeding 31 days.
(J) A provision that from time to time all new employees or members eligible
for insurance and desiring the same shall be added to the group or class
thereof originally insured.
(K) A provision that if the group policy terminates or is
amended so as to terminate the insurance of any class of insured persons,
every person insured thereunder at the date of such termination whose insurance
terminates, including the insured dependent of a covered person, and who
has been so insured for at least five years prior to such termination date shall be
entitled to have issued by the insurer an individual policy of life insurance,
subject to the same conditions and limitations as are provided by provision
(H) above, except that the group policy may provide that the amount of such
individual policy shall not exceed the smaller of (a) the amount of the
person's life insurance protection ceasing because of the termination or amendment of
the group policy, less the amount of any life insurance for which he is
or becomes eligible under a group policy issued or reinstated by the same
or another insurer within 31 days after such termination, or (b) $10,000.
(L) A provision that if a person insured under the group policy, or the
insured dependent of a covered person, dies during the period within which
the individual would have been entitled to have an individual policy issued
in accordance with provisions (H) or (I) above and before such an individual
policy shall have become effective, the amount of life insurance which he
would have been entitled to have issued under such individual policy shall
be payable as a claim under the group policy, whether or not application
for the individual policy or the payment of the first premium therefor has been made.
(M) If active employment is a condition of insurance, a provision
that an insured may continue coverage during the insured's total disability
by timely payment to the policyholder of that portion, if any, of the premium
that would have been required from the insured had total disability not
occurred. The continuation shall be on a premium paying basis for a period
of six months from the date on which the total disability started, but not
beyond the earlier of (a) approval by the insurer of continuation of the
coverage under any disability provision which the group insurance policy
may contain or (b) the discontinuance of the group insurance policy.
(N) If active employment is a condition of insurance, in the case of a policy of group life insurance replacing another policy of group life insurance in force with another insurance carrier immediately prior to the effective date of the new policy, a provision preventing loss of coverage, subject to premium payments, for those active employees who are not actively at work on the effective date of the new policy if the following conditions are met:
(1) the active employee was insured under the prior
| | carrier's group life insurance policy immediately prior to the effective date of the policy;
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| (2) the active employee is not actively at work on
| | the effective date of the new policy;
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| (3) the active employee is a member of an eligible
| | class under the policy; and
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| (4) the active employee is not receiving or
| | eligible to receive benefits under the prior carrier's group life insurance policy.
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| (O) If active employment is a condition of insurance, a provision that for active employees receiving or eligible to receive benefits under provision (N) the continued coverage will remain in effect until the earliest of the following:
(1) the date the employee returns to active work;
(2) the date that coverage under the prior
| | carrier's group life insurance policy would have ended for any reason other than the termination of the policy;
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| (3) the date that coverage would otherwise end
| | under the replacing carrier's policy;
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| (4) a date no less than 6 months after the
| | replacement coverage begins; or
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| (5) the date the employee is covered or is eligible
| | for coverage under the prior carrier's group policy.
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| (P) If active employment is a condition of insurance, a provision that the replacing carrier's obligations under provisions (N) and (O) may be limited to the amount for which the employee was covered under the prior carrier's group life insurance policy and may be reduced by any amounts payable under the prior carrier's group life insurance policy.
(Q) In the case of a policy insuring the lives of debtors,
a provision that the insurer will furnish to the policyholder for delivery
to each debtor insured under the policy a certificate of insurance describing
the coverage and specifying that the death benefit shall first be applied
to reduce or extinguish the indebtedness. Whenever the amount of insurance
payable exceeds the amount of outstanding indebtedness the excess benefit
shall be payable to the person otherwise contractually or legally entitled
thereto; if there be no person determined to be so entitled, such excess
shall be paid to the estate of the insured person.
(Source: P.A. 102-367, eff. 1-1-22; 102-743, eff. 5-6-22.)
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