215 ILCS 5/ Illinois Insurance Code.

(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.)

(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.)

(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.)

(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.)

(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.)

(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%.

(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.

(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.)

(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.)

(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.)

(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:

(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);

(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;

(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

(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.

(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.

(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:

(a) Any prior withdrawals from or partial surrenders of the contract accumulated at rates of interest as indicated in subdivision (4)(B);

(b) An annual contract charge of $50, accumulated at rates of interest as indicated in subdivision (4)(B);

(c) Any premium tax paid by the company for the contract, accumulated at rates of interest as indicated in subdivision (4)(B); and

(d) The amount of any indebtedness to the company on the contract, including interest due and accrued.

(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:

(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);

(ii) Reduced by 125 basis points;

(iii) Where the resulting interest rate is not less than 0.15%; and

(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.

(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.

(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.

(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.)

(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.)

(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.)

(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.)

(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.)

(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;

(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

(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.

(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.

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;

(2) the active employee is not actively at work on the effective date of the new policy;

(3) the active employee is a member of an eligible class under the policy; and

(4) the active employee is not receiving or eligible to receive benefits under the prior carrier's group life insurance policy.

(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;

(3) the date that coverage would otherwise end under the replacing carrier's policy;

(4) a date no less than 6 months after the replacement coverage begins; or

(5) the date the employee is covered or is eligible for coverage under the prior carrier's group policy.

(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.)

(215 ILCS 5/232) (from Ch. 73, par. 844)

Sec. 232. Extension of time and modification of standard provisions.

(1) Any company authorized to transact business in this State on the effective date of this Code may continue to issue policies and contracts of the kind or kinds it was permitted to issue immediately prior to such effective date, until December 31, 1937.

(2) Policies and contracts may be issued and delivered in this State which contain provisions more favorable to the holders of such policies or contracts than the standard provisions required by this article. No domestic company and holder of a policy or contract shall after the effective date of this Code enter into any agreement to waive or modify in whole or in part a standard provision required by this Code or any prior law of this State, for the benefit of such holder, unless the agreement be approved by a court in a proceeding under Article XIII.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/233) (from Ch. 73, par. 845)

Sec. 233. Participating and non-participating policies.

After the calendar year during which this Code becomes effective, no life company authorized to do business in this State shall issue both participating and non-participating policies unless at least ninety per centum of the profits on its participating policies shall inure to the benefit of the participating policyholders. Any company having in force both participating and non-participating policies shall keep a separate accounting for each class of business and shall make and include in the annual statement to be filed with the Director each year a separate statement showing the gains, losses and expenses properly attributable to each of such classes and also showing the manner in which any general outlay of expense of the company has been apportioned to each except that this provision shall not apply to any company in which ninety per centum or more of the business in force is either participating or non-participating. This section shall not apply to business done by such life company outside this state, nor to paid-up, or temporary insurance or pure endowment benefits issued or granted pursuant to the non-forfeiture provision prescribed in clause (g) of sub-section (1) of Section 224 nor to annuities or policies of reinsurance.

(Source: Laws 1957, p. 607.)

(215 ILCS 5/234) (from Ch. 73, par. 846)

Sec. 234. Notice of premium required.

(1) No life company doing business in this State shall declare any policy forfeited or lapsed within six months after default in payment of any premium installment or interest or any portion thereof, nor shall any such policy be forfeited or lapsed by reason of nonpayment when due of any premium, installment or interest, or any portion thereof, required by the terms of the policy to be paid, within six months from the default in payment of such premium, installment or interest, unless a written or printed notice stating the amount of such premium, installment, interest or portion thereof due on such policy, the place where it shall be paid and the person to whom the same is payable, shall have been duly addressed and mailed with the required postage affixed, to the person whose life is insured, or the assignee of the policy, (if notice of the assignment has been given to the company) at his last known post office address, at least fifteen days and not more than forty-five days prior to the day when the same is due and payable, before the beginning of the period of grace, except that in any case in which a parent insures the life of his minor child, the company may send notice of premium due to the parent. Such notice shall also state that unless such premium or other sums due shall be paid to the company or its agents the policy and all payments thereon will become forfeited and void, except as to the right to a surrender value or paid-up policy as provided for by the policy. The affidavit of any officer, clerk or agent of the company or of any one authorized to mail such notice that the notice required by this section bearing the required postage has been duly addressed and mailed shall be presumptive evidence that such notice has been duly given.

(2) This section shall not apply to cancellable accident and health policies which are renewable at the option of the company nor shall it apply to group policies, industrial life policies, or to any policies upon which premiums are payable monthly or at shorter intervals.

(Source: Laws 1961, p. 3852.)

(215 ILCS 5/234.1) (from Ch. 73, par. 846.1)

Sec. 234.1. (Notice of the Enactment of a Non-Forfeiture Option.) No life company doing business in this State may enact a non-forfeiture option, unless a notice is given to the policyowner which explains this action and refers the policyowner to the other available options, if any, under the provisions of the policy. Evidence of this notice shall be maintained by the insurer.

(Source: P.A. 80-566.)

(215 ILCS 5/235) (from Ch. 73, par. 847)

Sec. 235. Extension of time for payment of life premium.

A life company may enter into subsequent agreements in writing with the insured, which need not be attached to the policy, to extend the time for the payment of any premium or part thereof, upon condition that failure to comply with the terms of such agreement shall cause the policy to lapse as provided in said agreement or in the policy. Subject to such lien as may be created to secure any indebtedness contracted by the insured in consideration of the extension, such agreement shall not impair any right existing under the policy.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/235.1)

Sec. 235.1. Notice of cancellation; secondary addressee.

(a) A life company issuing an individual life insurance contract on or after January 1, 2022 shall notify an applicant, in writing on a form prescribed by the company at the time of application for the policy, of the applicant's right to designate a secondary addressee to receive notice of cancellation of the policy based on nonpayment of premium. The applicant may make such designation at the time of application for such policy or at any time such policy is in force by submitting a written notice to the insurer containing the name and address of the secondary addressee.

(b) The insurer's transmission to a secondary addressee of a copy of a notice of cancellation based on nonpayment of premium shall be in addition to the transmission of the original document to the policyholder. The copy of the notice of cancellation transmitted to the secondary addressee shall be made in the same manner and form required for the transmission of the notice to the policyholder.

(c) The designation of a secondary addressee shall not constitute acceptance of any liability on the part of the secondary addressee or insurer for services provided to the policyholder.

(d) This Section does not apply to any individual life insurance contract under which premiums are payable monthly or more frequently and are regularly collected by a licensed agent or are paid by credit card or any preauthorized check processing or automatic debit service of a financial institution.

(e) Nothing in this Section shall prohibit an applicant or policyholder from designating a life insurance agent of record as his or her secondary addressee.

(Source: P.A. 102-542, eff. 1-1-22.)

(215 ILCS 5/236) (from Ch. 73, par. 848)

Sec. 236. Discrimination prohibited.

(a) No life company doing business in this State shall make or permit any distinction or discrimination in favor of individuals among insured persons of the same class and equal expectation of life in the issuance of its policies, in the amount of payment of premiums or rates charged for policies of insurance, in the amount of any dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes.

(b) No life company shall make or permit any distinction or discrimination against individuals with disabilities in the amount of payment of premiums or rates charged for policies of life insurance, in the amount of any dividends or death benefits payable thereon, or in any other terms and conditions of the contract it makes unless the rate differential is based on sound actuarial principles and a reasonable system of classification and is related to actual or reasonably anticipated experience directly associated with the disability.

(c) No life company shall refuse to insure, or refuse to continue to insure, or limit the amount or extent or kind of coverage available to an individual, or charge an individual a different rate for the same coverage solely because of blindness or partial blindness. With respect to all other conditions, including the underlying cause of the blindness or partial blindness, persons who are blind or partially blind shall be subject to the same standards of sound actuarial principles or actual or reasonably anticipated experience as are sighted persons. Refusal to insure includes denial by an insurer of disability insurance coverage on the grounds that the policy defines "disability" as being presumed in the event that the insured loses his or her eyesight. However, an insurer may exclude from coverage disabilities consisting solely of blindness or partial blindness when such condition existed at the time the policy was issued.

(d) No life company shall refuse to insure or to continue to insure an individual solely because of the individual's status as a member of the United States Air Force, Army, Coast Guard, Marines, or Navy or solely because of the individual's status as a member of the National Guard or Armed Forces Reserve.

(e) An insurer or producer authorized to issue policies of insurance in this State may not make a distinction or otherwise discriminate between persons, reject an applicant, cancel a policy, or demand or require a higher rate of premium for reasons based solely upon an applicant's or insured's past lawful travel experiences or future lawful travel plans. This subsection (e) does not prohibit an insurer or producer from excluding or limiting coverage under a policy or refusing to offer the policy based upon past lawful travel or future lawful travel plans or from charging a different rate for that coverage when that action is based upon sound actuarial principles or is related to actual or reasonably expected experience and is not based solely on the destination's inclusion on the United States Department of State's travel warning list.

(Source: P.A. 99-143, eff. 7-27-15.)

(215 ILCS 5/237) (from Ch. 73, par. 849)

Sec. 237. Illegal inducements - Penalty. No life company authorized to do business in this State shall issue or deliver in this State or permit its agents, officers or employees to issue or deliver in this State as an inducement to insurance or in connection therewith, any agency company shares or other capital shares, benefit certificates or shares in any common law corporation, securities of any special or advisory board, or other contracts of any kind promising returns and profits as an inducement to insurance; and no life company shall be authorized to do business in this State which issues or permits its agents, officers or employees to issue in this State or in any other state, agency company shares or other capital shares or benefit certificates or shares in any common law corporation or securities of any special advisory board or other contracts of any kind promising returns and profits as an inducement to insurance; and no corporation acting as an agent of a life company, or any of its agents, officers or employees shall be permitted to sell, agree or offer to sell, or give or offer to give directly or indirectly, in any manner whatsoever, as an inducement to insurance or in connection therewith, any shares, securities, bonds or agreements of any form or nature promising returns and profits as an inducement to insurance or in connection therewith. It shall be the duty of the Director upon due proof after notice and hearing to revoke the certificate of authority of any company or the license of any agent so offending, or suspend such license or certificate of authority for any period of time up to, but not to exceed, two years; or may by order require such insurance company or agent to pay to the people of the State of Illinois a penalty in a sum not exceeding five hundred dollars, and upon the failure of such insurance company or agent to pay such penalty within twenty days after the mailing of such order, postage prepaid, registered, and addressed to the last known place of business of such insurance company or agent, unless such order is stayed by an order of a court of competent jurisdiction, the Director of Insurance may revoke or suspend the license or certificate of authority of such insurance company or agent for any period of time up to, but not exceeding a period of, two years if he finds that any such company or agent thereof has violated any of the provisions of this section.

(Source: Laws 1957, p. 1530.)

(215 ILCS 5/238) (from Ch. 73, par. 850)

Sec. 238. Exemption.

(a) All proceeds payable because of the death of the insured and the aggregate net cash value of any or all life and endowment policies and annuity contracts payable to a wife or husband of the insured, or to a child, parent or other person dependent upon the insured, whether the power to change the beneficiary is reserved to the insured or not, and whether the insured or his estate is a contingent beneficiary or not, shall be exempt from execution, attachment, garnishment or other process, for the debts or liabilities of the insured incurred subsequent to the effective date of this Code, except as to premiums paid in fraud of creditors within the period limited by law for the recovery thereof.

(b) Any insurance company doing business in this State and governed by this Code shall encumber or surrender accounts as defined in Section 10-24 of the Illinois Public Aid Code held by the insurance company owned by any responsible relative who is subject to a child support lien, upon notice of the lien or levy by the Department of Healthcare and Family Services (formerly Illinois Department of Public Aid) or its successor agency pursuant to Section 10-25.5 of the Illinois Public Aid Code, or upon notice of interstate lien from any other state's agency responsible for implementing the child support enforcement program set forth in Title IV, Part D of the Social Security Act.

This Section does not prohibit the furnishing of information in accordance with the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Any insurance company governed by this Code shall enter into an agreement for data exchanges with the Department of Healthcare and Family Services provided the Department of Healthcare and Family Services pays to the insurance company a reasonable fee not to exceed its actual cost incurred. An insurance company providing information in accordance with this item shall not be liable to any owner of an account as defined in Section 10-24 of the Illinois Public Aid Code or other person for any disclosure of information to the Department of Healthcare and Family Services (formerly Department of Public Aid), for encumbering or surrendering any accounts as defined in Section 10-24 of the Illinois Public Aid Code held by the insurance company in response to a lien or order to withhold and deliver issued by a State agency, or for any other action taken pursuant to this item, including individual or mechanical errors, provided the action does not constitute gross negligence or willful misconduct. An insurance company shall have no obligation to hold, encumber, or surrender any accounts as defined in Section 10-24 of the Illinois Public Aid Code until it has been served with a subpoena, summons, warrant, court or administrative order, lien, or levy requiring that action.

(Source: P.A. 95-331, eff. 8-21-07.)

(215 ILCS 5/238.1)

Sec. 238.1. Data exchanges; administrative liens.

(a) Any insurance company doing business in the State and governed by this Code shall enter into an agreement for data exchanges with the Department of Healthcare and Family Services for the purpose of locating accounts as defined in Section 10-24 of the Illinois Public Aid Code of responsible relatives to satisfy past-due child support owed by responsible relatives under an order for support entered by a court or administrative body of this or any other State on behalf of resident or non-resident persons.

(b) Notwithstanding any provisions in this Code to the contrary, an insurance company shall not be liable to any person:

(1) for any disclosure of information to the Department of Healthcare and Family Services (formerly Illinois Department of Public Aid) under subsection (a);

(2) for encumbering or surrendering any accounts as defined in Section 10-24 of the Illinois Public Aid Code held by such insurance company in response to a notice of lien or levy issued by the Department of Healthcare and Family Services (formerly Illinois Department of Public Aid), or by any other state's child support enforcement agency, as provided for in Section 238 of this Code; or

(3) for any other action taken in good faith to comply with the requirements of subsection (a).

(Source: P.A. 95-331, eff. 8-21-07.)

(215 ILCS 5/239) (from Ch. 73, par. 851)

Sec. 239. Misrepresentations-Penalty.

No agent, examining physician, or other person shall knowingly or wilfully make any false or fraudulent statement or representation in, or with reference, to any application for life insurance, or shall make any such statement or representation for the purpose of obtaining any fees, commission, money or benefit from or in any life company. Any person who violates any of the provisions of this section shall be guilty of a Class A misdemeanor.

(Source: P.A. 77-2699.)

(215 ILCS 5/240) (from Ch. 73, par. 852)

Sec. 240. Premium deposit reserve.

A life company may contract for or accept premium deposits, other than premiums stated in the policy. The unused accumulation from such shall be held and accounted for as a premium deposit reserve, and in such case the policy or an endorsement thereon shall provide for the manner of application of the premium deposit reserve to the payment of premiums in default and for the disposition of such reserve if it is not sufficient to pay the next premium. Such premium deposit reserve shall be available as an addition to the loan and cash surrender values, shall be paid with other benefits upon death or maturity of the policy, and shall be paid to the insured whenever the cash surrender value with the premium deposit reserve shall equal or exceed the original amount of insurance, but no part of the premium deposit reserve may be paid to the insured during the continuance of the policy except at such times or in such amounts as specified in the policy or in endorsements thereon.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/241) (from Ch. 73, par. 853)

Sec. 241. Trust settlements.

Any domestic life company shall have the power to hold the proceeds of any policy issued by it under a trust or other agreement upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries, and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as shall have been agreed to in writing by such company and the policyholder. Upon maturity of a policy in the event the policyholder has made no such agreement, the company shall have power to hold the proceeds of the policy under an agreement with the beneficiaries. Such company shall not be required to segregate funds so held but may hold them as part of its general company assets. A foreign or alien company, when authorized by its charter or the laws of its domicile, may exercise any such powers in this State.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/242) (from Ch. 73, par. 854)

Sec. 242. Rights of minors.

Any minor of the age of fifteen years or more may, notwithstanding such minority, contract for life, health and accident insurance on his own life for his own benefit or for the benefit of his father, mother, husband, wife, child, brother or sister, and may exercise all such contractual rights and powers with respect to any such contract of insurance as might be exercised by a person of full legal age, and may exercise with like effect all rights and privileges under such contract, including the surrender of his interest therein and the giving of a valid discharge for any benefit accruing or money payable thereunder. Such minor shall not, by reason of his minority, be entitled to rescind, avoid, or repudiate such contract, or any exercise of a right or privilege thereunder.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/243) (from Ch. 73, par. 855)

Sec. 243. Contingency reserves.

(1) Any domestic life company may accumulate and maintain in addition to an amount equal to the net value of its participating policies computed according to the standard adopted by it under section 223, a contingency reserve not exceeding the following respective percentages of said net values, to-wit:

(a) When said net values are less than one hundred thousand dollars, twenty per centum thereof or the sum of ten thousand dollars, whichever is the greater.

(b) When said net values are greater than one hundred thousand dollars the percentage thereof measuring the contingency reserve shall decrease one-half of one per centum for each one hundred thousand dollars of said net values up to one million dollars; one-half of one per centum for each additional one million dollars up to ten million dollars; one-half of one per centum for each additional two million, five hundred thousand dollars up to fifteen million dollars; and, if said net values equal or exceed the last mentioned amount, the contingency reserve shall not exceed ten per centum thereof.

(2) As the net values of said policies increase and the maximum percentage measuring the contingency reserve decreases the company may maintain any contingency reserve accumulated under this section, although it may exceed the maximum percentage herein prescribed, but may not add to the contingency reserve when the addition will bring it beyond the maximum percentage.

(3) Nothing herein contained shall be construed to affect any existing surplus or contingency reserves held by any such company except that whenever the existing surplus and contingency reserves, exclusive of said net values and of all accumulations held on account of existing deferred dividend policies or groups of such policies, shall exceed the limit above mentioned it shall not be entitled to maintain any additional contingency reserve. However, for cause shown the Director may at any time and from time to time permit any company to accumulate and maintain a contingency reserve in excess of the limit above mentioned for a prescribed period not exceeding one year under any one permission, by filing in his office a decision stating his reasons therefor and causing the same to be published in his next annual report.

(4) This section shall not be construed as preventing the accumulation from the non-participating business of a contingency reserve for the benefit of non-participating policies.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/244) (from Ch. 73, par. 856)

Sec. 244. Limitation of expenses for life companies.

(1) No life company authorized to do business in this State shall make or incur acquisition expenses in any calendar year after the calendar year during which this Code becomes effective amounting to more than the first year's gross premiums nor shall such company make or incur renewal expenses on policies issued after such year in any of the nine succeeding renewal years following each year's new business in excess of 10% of the gross renewal premiums, unless the company collects renewal premiums in person in which case such renewal expense applicable to such policies for as long as such premiums are collected in person shall not exceed 20%, except that renewal expenses in excess of such 10% limitation relative to the 9 succeeding renewal years may be made or incurred if such excess in any year be included with acquisition expenses made or incurred during that calendar year. After the tenth policy year the annual maximum renewal expenses shall not exceed 3% of such gross annual renewal premiums, unless the company collects renewal premiums in person in which case such renewal expense applicable to such policies for as long as such premiums are collected in person shall not exceed 13%, but a company may pay renewal expenses after the tenth policy year in excess of 3% if such excess is charged to the renewal expense of that calendar year within the limitation provided herein.

(2) In computing such acquisition expenses there shall be included all commissions and other valuable considerations paid or payable to or for agents, and other expenses made or incurred in acquiring new business, except medical examination and inspection fees and the normal overhead expenses of operation at the home office. In computing such renewal expenses there shall be included commissions and other valuable considerations paid or payable to or for agents, and all other expenses made or incurred for the collection of such renewal premiums, except the normal overhead expenses of operation at the home office.

(3) This Section shall not apply to accident and health or industrial business written by any companies.

(Source: Laws 1967, p. 3359.)