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SECTION 4221
Standard nonforfeiture law
Insurance (ISC) CHAPTER 28, ARTICLE 42
§ 4221. Standard nonforfeiture law. (a) In the case of policies issued
on or after the operative date of this section as defined in subsection
(p) hereof, no policy of life insurance, except as stated in subsection
(o) hereof, shall be delivered or issued for delivery in this state
unless it shall contain in substance the following provisions, or
corresponding provisions which in the opinion of the superintendent are
at least as favorable to the defaulting or surrendering policyholder as
are minimum requirements hereinafter specified and are essentially in
compliance with subsection (n) hereof:

(1) That, in the event of default in any premium payment, the company
will grant, upon proper request not later than sixty 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
value as may be hereinafter specified. In lieu of such stipulated
paid-up nonforfeiture benefit, the company may substitute, upon proper
request not later than sixty days after the due date of the premium in
default, a more favorable 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.

(2) That, upon surrender of the policy within sixty days after the due
date of any premium payment in default after premiums have been paid for
at least three full years, the company will pay, in lieu of any paid-up
nonforfeiture benefit, a cash surrender value of such amount as may be
hereinafter specified.

(3) 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 sixty days
after the due date of the premium in default.

(4) 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,
the company will pay, upon surrender of the policy within thirty days
after any policy anniversary, a cash surrender value of such amount as
may be hereinafter specified.

(5) In the case of policies which provide for the crediting of
additional amounts pursuant to subsection (b) of section four thousand
two hundred thirty-two of this article, under which cash surrender
values are adjusted in accordance with a market-value adjustment
formula, 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 any 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 any 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 twenty 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.

(5-a) In the case of policies which provide for the crediting of
additional amounts pursuant to subsection (b) of section four thousand
two hundred thirty-two of this article and which provide for surrender
charges in accordance with subsection (n-1) of this section, a statement
as to any charges that will be imposed upon surrender of the policy.

(5-b) In the case of policies that provide for the adjustment of any
cash surrender values in accordance with a market-value adjustment
formula, a statement as to the times (which shall not be less frequently
than once every ten years after issuance of the policy) on which cash
surrender values will be determined without the use of such a formula.

(6) 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 any statute 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.

(7) That the company shall deliver at issue to each holder of a policy
under which additional amounts may be credited pursuant to subsection
(b) of section four thousand two hundred thirty-two of this article, or
under which cash surrender values and policy loan values are adjusted in
accordance with a market-value adjustment formula, a statement
containing such information as the superintendent prescribes, and shall
mail to each such holder at least once each policy year or within sixty
days after the end of a policy year a statement as of a date during such
year as to the death benefit, cash surrender value and loan value under
the policy (and any amount by which such cash surrender value and loan
value were adjusted in accordance with a market-value adjustment
formula) on such date as well as such further information as the
superintendent requires. The statement shall be addressed to the last
post-office address of the policyholder known to the company.

(8) Any of the foregoing provisions or portions of this subsection 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 six months after demand therefor with
surrender of the policy.

(b) (1) In the case of contracts issued on or after the operative date
of this section as defined in subsection (p) hereof and prior to the
operative date of section four thousand two hundred twenty-three of this
article, no contract of annuity or pure endowment, except as stated in
subsection (o) hereof, 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 superintendent are
at least as favorable to the defaulting or surrendering contract holder:

(A) That in the event of default in any stipulated payment the company
will grant a paid-up nonforfeiture benefit on a plan stipulated in the
contract, effective as of such due date, of such value as may be
hereinafter specified.

(B) A statement of the mortality table, if any, and interest rate used
in calculating the paid-up nonforfeiture benefits available under the
contract, together with a table showing either the cash surrender value
or the paid-up nonforfeiture benefit, if any, available on each
anniversary of the contract either during the first twenty contract
years or during the term of stipulated payments, whichever is shorter,
such benefits to be calculated upon the assumption that there are no
dividends or paid-up additions credited to the contract and that there
is no indebtedness to the company on the contract.

(C) A statement that the paid-up nonforfeiture benefits available
under the contract are not less than the minimum benefits required by
any statute of the state in which the contract is delivered; an
explanation of the manner in which the paid-up nonforfeiture benefits
are altered by the existence of any paid-up additions credited to the
contract or any indebtedness to the company on the contract; if a
detailed statement of the method of computation of the benefits shown in
the contract 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 contract is delivered; and a statement of the
method to be used in calculating the paid-up nonforfeiture benefit
available under the contract on any contract anniversary beyond the last
anniversary for which such benefits are consecutively shown in the
contract.

If a company shall provide for the payment of a cash surrender value,
it shall reserve the right to defer the payment of such value for a
period of six months after demand therefor with surrender of the
contract.

(2) Notwithstanding the requirements of this subsection, any deferred
annuity contract may provide that if the annuity allowed under any
paid-up nonforfeiture benefit would be less than sixty dollars annually,
the company may at its option grant a cash surrender value in lieu of
such paid-up nonforfeiture benefit of such amount as may be required by
subsection (f) hereof.

(c) (1) Any cash surrender value available under any policy referred
to in subsection (a) hereof, in the event of default in a premium
payment due on any policy anniversary, whether or not required by such
subsection, 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
(g), (h), (i) and (k) hereof, 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, including interest due or
accrued.

(2) In the case of any policy issued on or after the operative date of
subsection (k) hereof, which provides supplemental life insurance or
annuity benefits at the option of the insured and for an identifiable
additional premium by rider or supplemental policy provision, the cash
surrender value referred to in paragraph one of this subsection shall be
in an amount not less than the sum of the cash surrender value as
defined in such paragraph for an otherwise similar policy issued at the
same age without such rider or supplemental policy provision, the cash
surrender value as defined in such paragraph for a policy which provides
only the supplemental life insurance benefits otherwise provided by such
rider or supplemental policy provision, and the cash surrender value as
defined in section four thousand two hundred twenty-three of this
article for a contract which provides only the supplemental annuity
benefits otherwise provided by such rider or supplemental policy
provision.

(3) In the case of any family policy issued on or after the operative
date of subsection (k) hereof as defined therein, which defines a
primary insured and provides term insurance on the life of the spouse of
the primary insured expiring before the spouse's age seventy-one, the
cash surrender value referred to in paragraph one of this subsection
shall be an amount not less than the sum of the cash surrender value as
defined in such paragraph 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 defined in such paragraph for a policy which
provides only the benefits otherwise provided by such term insurance on
the life of the spouse.

(4) Any cash surrender value available within thirty days after any
policy anniversary under any such policy paid up by completion of all
premium payments or any such policy continued under any paid-up
nonforfeiture benefit, whether or not required by subsection (a) hereof,
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, including interest due or accrued.

(5) Every company must provide, to any policyowner who so requests in
writing, within twenty business days from the date the written request
is received by the company, a statement of the cash surrender value of
the policy.

(d) Any paid-up nonforfeiture benefit available under any policy
referred to in subsection (a) hereof, 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.

(e) (1) Any paid-up nonforfeiture benefit available under any annuity
or pure endowment contract referred to in subsection (b) hereof, in the
event of default in a stipulated payment due on any contract anniversary
shall be such that its present value as of such anniversary shall be 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 contract, including any existing paid-up additions, if there had
been no default, over the sum of (i) the then present value of the
adjusted stipulated payments defined in subsection (g) hereof
corresponding to stipulated payments which would have fallen due on and
after such anniversary, and (ii) the amount of any indebtedness to the
company on the contract, including interest due or accrued.

(2) In determining the benefits referred to in paragraph one hereof
and in calculating the adjusted stipulated payments referred to in
subsection (g) hereof, in the case of annuity contracts under which an
election may be made to have annuity payments commence at optional
dates, the annuity payments shall be deemed to commence at a date which
shall be the latest permitted by the contract for the commencement of
such payments but not later than the contract anniversary nearest the
annuitant's seventieth birthday or the tenth anniversary of the
contract, whichever is later; and the stipulated payments shall be
deemed to be payable for the longest period during which they would be
payable if election were made to have the annuity payments commence at
such date.

(f) Any cash surrender value allowed by any annuity or pure endowment
contract referred to in subsection (b) hereof and the present value,
under any optional provision, of future benefits commencing on the due
date of the stipulated payment in default shall each be at least equal
to the then present value of the minimum paid-up nonforfeiture benefit
required by subsection (e) hereof.

(g) (1) This subsection shall not apply to policies issued on or after
the operative date of subsection (k) as defined herein.

(2) Except as provided in paragraph four hereof, the adjusted premiums
for any policy referred to in subsection (a) hereof 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 stated in the policy as extra premiums to cover
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) two percent 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) forty percent of the adjusted premium for
the first policy year; (iv) twenty-five percent 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 items (iii) and (iv) hereof, no
adjusted premium shall be deemed to exceed four percent 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.

(3) 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 uniform 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 date of
issue as the benefits under the policy, provided, however, that in the
case of a policy providing a varying amount of insurance (including
policies in which the death benefit prior to a date specified in the
policy does not exceed the premiums paid with interest, or the cash
value of the policy if greater) issued on the life of a child under age
ten, the equivalent uniform amount of insurance shall be calculated as
though the amount of insurance provided by the policy prior to the
attainment of age ten were the amount provided by such policy at age
ten.

(4) The adjusted premiums for any policy providing term insurance
benefits by rider or supplemental policy provision shall be equal to (i)
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 (ii)
the adjusted premiums for such term insurance, the foregoing items (i)
and (ii) being calculated separately and as specified in paragraphs two
and three hereof except that, for the purposes of items (ii), (iii) and
(iv) of paragraph two hereof, the amount of insurance or equivalent
uniform amount of insurance used in the calculation of the adjusted
premiums referred to in item (ii) of this paragraph 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 item
(i) of this paragraph.

(5) The adjusted stipulated payments for any annuity or pure endowment
contract referred to in subsection (b) hereof shall be calculated on an
annual basis and shall be such uniform percentage of the respective
stipulated payments specified in the contract for each contract year
that the present value, at the date of issue of the contract, of all
such adjusted stipulated payments shall be equal to the sum of (i) the
then present value of the future guaranteed benefits provided for by the
contract; (ii) twenty percent of the adjusted stipulated payment for the
first contract year; and (iii) two percent of the adjusted stipulated
payment for the first contract year for each year not exceeding twenty
during which stipulated payments are payable.

(6) Except as otherwise provided in subsections (h), (i) and (j)
hereof, all adjusted premiums, adjusted stipulated payments, and present
values referred to in this section shall be calculated on the basis of
(i) the rate of interest, not exceeding three and one-half percent per
annum, specified in the policy or contract for calculating cash
surrender values, if any, and paid-up nonforfeiture benefits; and (ii) a
mortality table which shall be: for ordinary insurance, 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 three years younger than the actual age of the insured; for
industrial insurance, the 1941 Standard Industrial Mortality Table; for
annuity and pure endowment contracts, either the 1937 Standard Annuity
Mortality Table, the Annuity Mortality Table for 1949 Ultimate, any
modification of either of these tables approved by the superintendent or
any other table approved by the superintendent. 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 one hundred and
thirty percent 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 superintendent.

(h) (1) This subsection shall not apply to ordinary policies issued on
or after the operative date of subsection (k) hereof.

(2) In the case of ordinary policies issued on or after the operative
date of this subsection, all adjusted premiums and present values 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 not
exceeding three and one-half percent per annum except that four percent
per annum may be used for policies issued on or after June thirteenth,
nineteen hundred seventy-four and prior to January first, nineteen
hundred seventy-nine, and a rate of interest not exceeding five and
one-half percent per annum may be used for policies issued on or after
January first, nineteen hundred seventy-nine, 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
six 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, 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 superintendent.

(3) Any company may file with the superintendent a written notice of
its election to comply with the provisions of this subsection after a
specified date before January first, nineteen hundred sixty-six. 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
first, nineteen hundred sixty-six.

(i) (1) In the case of industrial policies issued on or after the
operative date of this subsection, all adjusted premiums and present
values 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 not exceeding three and one-half percent per
annum except that four percent per annum may be used for policies issued
on or after June thirteenth, nineteen hundred seventy-four and prior to
January first, nineteen hundred seventy-nine and a rate of interest not
exceeding five and one-half percent per annum may be used for policies
issued on or after January first, nineteen hundred seventy-nine;
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 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 superintendent.

(2) Any company may file with the superintendent a written notice of
its election to comply with the provisions of this subsection after a
specified date before January first, nineteen hundred and sixty-eight.
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 first, nineteen hundred and sixty-eight.

(j) In the case of individual annuity and pure endowment contracts
issued on or after the operative date of paragraph three of subsection
(c) of section four thousand two hundred seventeen of this article, and
prior to the operative date of section four thousand two hundred
twenty-three of this article, all adjusted stipulated payments and
present values referred to in this section shall be calculated on the
basis of the Annuity Mortality Table for 1949, Ultimate, or any
modification of this table approved by the superintendent, and the rate
of interest not exceeding four percent per annum, specified in the
contract for calculating cash surrender values, if any, and paid-up
nonforfeiture benefits, except that, if such rate of interest exceeds
three and one-half percent per annum, there shall be substituted for
such mortality table the 1971 Individual Annuity Mortality Table, or any
modification of this table approved by the superintendent.

(k) (1) This subsection shall apply to all policies issued on or after
the operative date as defined in this subsection.

(2) Except as provided in paragraph eight 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 premiums
specified in the policy for each policy year, excluding amounts payable
as extra premiums to cover impairments or special hazards and also
excluding any uniform annual contract charge or policy fee specified in
the policy in a statement of the method to be used in calculating the
cash surrender values and paid-up nonforfeiture benefits, that the
present value, at the date of issue of the policy, of all adjusted
premiums shall be equal to the sum of (i) the then present value of the
future guaranteed benefits provided for by the policy; (ii) one percent
of either the amount of insurance, if the insurance be uniform in
amount, or the average amount of insurance at the beginning of each of
the first ten policy years; and (iii) one hundred twenty-five percent of
the nonforfeiture net level premium as hereinafter defined. Provided,
however, that in applying the percentage specified in (iii) above no
nonforfeiture net level premium shall be deemed to exceed four percent
of either the amount of insurance, if the insurance be uniform in
amount, or the average amount of insurance at the beginning of each of
the first ten policy years. 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.

(3) The nonforfeiture net level premium shall be equal to the present
value, at the date of issue of the policy, of the guaranteed benefits
provided for by the policy divided by the present value, at the date of
issue of the policy, of an annuity of 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.

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

(5) Except as otherwise provided in paragraph eight of this
subsection, the recalculated future adjusted premiums for any such
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
also excluding any uniform annual contract charge or policy fee
specified in the policy in a statement of the method to be used in
calculating the cash surrender values and paid-up nonforfeiture
benefits, that the present value, at the time of change to the newly
defined benefits or premiums, of all 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.

(6) The additional expense allowance, at the time of the change to the
newly defined benefits or premiums, shall be the sum of (i) one percent
of the excess, if positive, of the average amount of insurance at the
beginning of each of the first ten policy years subsequent to the change
over the average amount of insurance prior to the change at the
beginning of each of the first ten 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) one hundred
twenty-five percent of the increase, if positive, in the nonforfeiture
net level premium.

(7) The recalculated nonforfeiture net level premium shall be equal to
the result obtained by dividing subparagraph (A) by subparagraph (B)
hereof where:

(A) equals the sum of

(i) 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

(ii) the present value of the increase in future guaranteed benefits
provided for by the policy, and

(B) 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.

(8) Notwithstanding any other provision 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.

(9) All adjusted premiums and present values referred to in this
section shall for all policies of ordinary insurance be calculated on
the basis of

(A) the Commissioners 1980 Standard Ordinary Mortality Table, or

(B) 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; and shall for all policies
issued in a particular calendar year 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.
Provided, however, that:

(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 (a) hereof, 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 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.

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

(vi) Any ordinary mortality tables, adopted after nineteen hundred
eighty by the National Association of Insurance Commissioners (or any
modifications thereof for any specified class or classes of risks), that
are approved by the superintendent 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.

(10) The nonforfeiture interest rate per annum for any policy issued
in a particular calendar year shall be equal to one hundred and
twenty-five percent of the calendar year statutory valuation interest
rate for such policy as defined in section four thousand two hundred
seventeen of this article rounded to the nearer one quarter of one
percent, computed, with respect to a single premium life insurance
policy of the kind referred to in item (vi) of subparagraph (B) of
paragraph four of subsection (c) of such section, on a year of issue
basis by using a reference interest rate defined for such policy in
subparagraph (F) of such paragraph for the year immediately preceding
the year of issue on the assumption that the company has submitted an
opinion and memorandum, in form and substance satisfactory to the
superintendent, of a qualified actuary with respect to such single
premium life insurance policies in accordance with item (vi) of
subparagraph (B) of such paragraph.

(11) Notwithstanding any other provision in this chapter 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.

(12) After May twenty-fourth, nineteen hundred eighty-two, any company
may file with the superintendent a written notice of its election to
comply, with respect to any plan of insurance, with the provisions of
this subsection after a specified date before January first, nineteen
hundred eighty-nine, which shall be the operative date of this
subsection for that plan of insurance for such company; the operative
dates of this subsection for other plans of insurance for such company
shall be any dates not later than January first of the third subsequent
calendar year, but in no event later than January first, nineteen
hundred eighty-nine. If a company makes no such election with respect to
any plan of insurance, the operative date of this subsection for such
company shall be January first, nineteen hundred eighty-nine.

(l) 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
subsection (a), (c), (d), (g), (h), (i) or (k) of this section, then:

(1) the superintendent must be satisfied that the benefits provided
under the plan are substantially as favorable to policyholders and
insureds as the minimum benefits otherwise required by subsection (a),
(c), (d), (g), (h), (i) or (k) hereof;

(2) the superintendent must be satisfied that the benefits and the
pattern of premiums of that plan are not such as to mislead prospective
policyholders or insureds;

(3) the cash surrender values and paid-up nonforfeiture benefits
provided by such plan must not be less than the minimum values and
benefits required for the plan computed by a method consistent with the
principles of this section, as determined by the superintendent.

(m) (1) Any cash surrender value and any paid-up nonforfeiture
benefit, available under any such policy or contract in the event of
default in the payment of any premium or stipulated payment due at any
time other than on the policy or contract anniversary, shall be
calculated with allowance for the lapse of time and the payment of
fractional premiums or stipulated payments beyond the beginning of the
policy or contract year in which the default occurs.

(2) All values referred to in subsections (c) through (k) hereof, may
be calculated upon the assumption that any death benefit is payable at
the end of the policy or contract year of death.

(3) Notwithstanding the provisions of subsections (c) and (e) hereof,
additional benefits payable (i) in the event of death or dismemberment
by accident, (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 twenty-six, 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, endowment, and
annuity 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.

(n) (1) This subsection, in addition to all other applicable
provisions of this section, shall apply to all policies issued on or
after January first, nineteen hundred eighty-six.

(2) 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 two-tenths of one
percent of either the amount of insurance, if the insurance be uniform
in amount, or the average amount of insurance at the beginning of each
of the first ten policy years, from the sum of (i) the greater of zero
and the basic cash value hereinafter specified and (ii) the present
value of any existing paid-up additions less the amount of any
indebtedness to the company under the policy.

(3) The basic cash value shall be equal to 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. Provided, however, that the effects
on the basic cash value of supplemental life insurance or annuity
benefits or of family coverage, as described in subsection (c) or (g)
hereof, whichever is applicable, shall be the same as are the effects
specified in such subsection, whichever is applicable, on the cash
surrender values defined in that subsection.

(4) The nonforfeiture factor for each policy year shall be an amount
equal to a percentage of the adjusted premium for the policy year, as
defined in subsection (g) or (k) hereof, whichever is applicable. Except
as is required by the next succeeding sentence of this paragraph, such
percentage:

(A) must 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 two-tenths of one percent of either the amount of insurance,
if the insurance be uniform in amount, or the average amount of
insurance at the beginning of each of the first ten policy years; and

(B) must be such that no percentage after the later of the two policy
anniversaries specified in subparagraph (A) hereof may apply to fewer
than five consecutive policy years.

Provided, that 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 (g) or (k) hereof, whichever is applicable, were substituted
for the nonforfeiture factors in the calculation of the basic cash
value.

(5) All adjusted premiums and present values referred to in this
subsection shall for a particular policy be calculated on the same
mortality and interest bases as are used in demonstrating the policy's
compliance with the other subsections of this section.

(6) (A) The cash surrender values referred to in this subsection shall
include any endowment benefits provided for by the policy.

(B) 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 (a), (c), (d), (k) and (m) hereof.

(C) 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 paragraph three of
subsection (m) hereof shall conform with the principles of this
subsection.

(n-1) (1) Notwithstanding any other provision in this section, any
policy that meets the requirements of this subsection shall be deemed to
provide the minimum nonforfeiture benefits and cash surrender values
required by this section. Any policy which is issued by a company after
the operative date of this subsection for the company and under which
additional amounts may be credited pursuant to subsection (b) of section
four thousand two hundred thirty-two of this article must meet the
requirements of this subsection.

(2) In this subsection,

(A) "Policy value" means an amount equal to gross premiums paid under
a policy (excluding separately identified premiums for riders or
supplementary benefits that are not credited to the policy value) plus
interest credited less the amount of any partial withdrawals and the
following charges as specified in the policy: (i) expense charges, (ii)
benefits charges, (iii) service charges, and (iv) partial surrender
charges.

(B) "Benefit charges" means mortality charges made for life insurance
on the insured person or persons and any charges made for riders or
supplementary benefits.

(C) "Service charges" means charges for the cost of transactions
requested by the policyowner such as partial withdrawals and benefit
illustrations. Transactional charges made under mandatory policy
provisions shall not be assessed unless specifically permitted by law or
regulation for such transactions.

(D) "Expense charges" means charges (other than service charges)
deducted from gross premiums before premiums are credited to the policy
value or otherwise deducted from the policy value.

(E) "Excess first year expense charges" means the greatest amount by
which (x) can exceed (y) based, for stipulated premium policies, on the
premiums set forth in the policy and, for other policies, on the
assumption that any premium (other than a single premium) payable in the
first policy year is also payable during the entire premium paying
period, where

(x) is the amount of the expense charges made in the first policy year
and

(y) is the arithmetic average of the corresponding charges which the
policy states would be imposed in policy years two through twenty or the
premium paying period, if shorter.

(F) "Excess expense charges for a face amount increase" means the
greatest amount by which (x) can exceed (y) based, for stipulated
premium policies, on the premiums set forth in the policy and, for other
policies, on the assumption that the net level whole life annual premium
for the increase applies throughout the remaining premium paying period,
where

(x) is the amount of the expense charges attributable to an increase
in face amount of insurance in the first policy year of the increase,
and

(y) is the arithmetic average of the corresponding charges
attributable to the increase which the policy states would be imposed in
the nineteen policy years following the increase or the premium paying
period, if shorter.

(G) "Interest credited" means the amount of interest credited to the
policy value but, with respect to policies meeting the requirements of
subparagraph (A) of paragraph three of this subsection, not less than
three percent in any year.

(H) "Net level whole life annual premium at issue" means an annual
premium based on face amounts of insurance set forth in the policy and
on the assumption of level annual premiums for life, the mortality table
rate used to calculate the maximum mortality charges (but not greater
than that permitted under item (iv) of subparagraph (A) of paragraph
three of this subsection) and an interest rate based on the higher of
four percent or that specified in the policy.

(I) "Net level whole life annual premium for an increase in the face
amount of insurance" means an additional annual premium for an increase
in the face amount of insurance determined as of the date of the
increase in accordance with subparagraph (H) of this paragraph as though
such increase were a separate policy.

(J) "Increase in face amount of insurance" means an increase in the
schedule of face amounts of insurance provided for in the policy and
made at the request of the policyholder and shall not include increases
in face amount resulting from a change in the death benefit option or
changes in death benefit pursuant to policy terms that do not affect the
face amount.

(K) "Surrender charge" means a deferred charge made to the policy
value in the event of a full or partial surrender of the policy,
reduction in the face amount of insurance or premium, or a default in a
premium payment.

(L) "Cash surrender value" means an amount equal to the policy value
less any surrender charge, before reduction for outstanding loans or
other amounts due under the policy.

(M) "Deferred first year expense charge", at issue or for an increase
in the face amount of insurance, means any portion of the allowable
first year expense charge that is not deducted from premiums or charged
to the policy value in the year of issue, or in the policy year of a
face amount increase, but deferred and charged to the policy value in
subsequent years.

(N) "Consumer price ratio" means the ratio (not to exceed two) of (x)
the consumer price index (for all urban households) for the September
preceding the policy year in which the ratio is being applied to (y) the
consumer price index for September, nineteen hundred eighty-five.

(3) A policy that meets the requirements of this subsection must
provide for cash surrender values that meet the requirements of either
subparagraph (A) or subparagraph (B) and comply with the provisions of
subparagraphs (C) and (D) of this paragraph.

(A) Cash surrender values shall be deemed to meet the requirements of
this subparagraph, if the following conditions are met:

(i) Expense charges for any policy year shall not exceed the
following:

(I) ninety percent of premiums received up to the net level whole life
annual premium at issue (regardless of when received),

(II) ten percent of all other premiums received,

(III) ninety percent of any net level whole life annual premium for
increases in the face amount of insurance (including increases
offsetting previous decreases),

(IV) ten dollars per one thousand dollars of initial face amount in
the first policy year,

(V) one dollar per one thousand dollars of the first one hundred
thousand dollars of face amount in subsequent policy years,

(VI) ten dollars per one thousand dollars of any increase in the face
amount of insurance in the year of increase (including increases
offsetting previous decreases),

(VII) a charge per policy in the first policy year equal to the
product of one hundred fifty dollars and the consumer price ratio, and

(VIII) in policy years after the first, a charge per policy per month
equal to the product of five dollars and the consumer price ratio.

(ii) Any surrender charge provided in the policy shall be such that
the initial surrender charge together with the expense charges made in
the first policy year (and on premiums up to the net level whole life
annual premium if received after the first year) do not exceed the sum
of the amounts determined in accordance with clauses (I) and (II) (for
premiums received in the first year) and clauses (IV) and (VII) of item
(i) of this subparagraph. The surrender charge at any time shall not be
greater than the difference between the maximum initial surrender charge
permitted under this subparagraph and the sum of all the deferred
expense charges made up to that time. Any additional surrender charges
that are imposed in connection with an increase in face amount of the
policy shall be such that such additional charges together with any
expense charges made in connection with such increase do not exceed the
sum of the amounts determined in accordance with clauses (III) and (VI)
of item (i) of this subparagraph.

(iii) Deferred first year expense charges shall be such that: (I) the
charge for any one year shall not exceed the maximum allowable surrender
charge for that year, and (II) the total of all such charges at any time
plus the surrender charge at that time shall not exceed the maximum
initial surrender charge. Any deferred first year expense charge imposed
with respect to an increase in the face amount of insurance shall be
subject to comparable limitations.

(iv) A policy meeting the requirements of this subparagraph if issued
before the operative date of subsection (k) of this section may not
impose mortality charges in excess of those based on the commissioners
1958 standard ordinary mortality table in the case of a standard
medically underwritten insured or the commissioners 1958 extended term
insurance table in the case of any other standard insured, and if issued
on or after such operative date may not impose mortality charges in
excess of those based on the commissioners 1980 standard ordinary
mortality table in the case of a standard medically underwritten insured
or the commissioners 1980 extended term insurance table in the case of
any other standard insured. At the option of the company, maximum
charges based on the commissioners 1980 standard ordinary mortality
table may be computed using ten-year select mortality factors. Maximum
charges may also be based on any other table (or modification thereof
for the specified class of risk) approved by the superintendent pursuant
to item (vi) of subparagraph (B) of paragraph nine of subsection (k) of
this section. For insurance issued on a substandard basis, such charges
may be based on appropriate modifications of such tables.

(B) Cash surrender values shall be deemed to meet the requirements of
this subparagraph, if the following conditions are met:

(i) Policy values shall not be less than a minimum policy value which
reflects the same transactions, the same interest credited and the same
benefit charges that are reflected in the actual policy value, except
that the excess first year expense charges shall not be greater than the
initial expense allowance, and any excess expense charges for a face
amount increase after issue shall not be greater than the increase
expense allowance. For purposes of this item, the initial expense
allowance shall be (I) the lesser of (aa) one hundred twenty-five
percent of the net level whole life annual premium at issue and (bb)
four percent of the average face amount of insurance provided under the
policy during the first ten policy years plus (II) one percent of such
average face amount, and the increase expense allowance shall be (I) the
lesser of (aa) one hundred twenty-five percent of the net level whole
life annual premium for an increase in the face amount of insurance and
(bb) four percent of the average increase in face amount of insurance
over a period of ten policy years (excluding any increases previously
taken into account in determining an expense allowance under this item)
plus (II) one percent of any such average increase.

(ii) Any surrender charge provided in the policy shall be such that
the initial surrender charge together with any excess first year expense
charges do not exceed the initial expense allowance. Any additional
surrender charges that are imposed in connection with an increase in
face amount shall be such that any such additional charge together with
any excess expense charges made in connection with such increase do not
exceed the increase expense allowance.

(iii) The policy shall provide that at least once each policy year the
policyholder has the option to apply the portion of the cash surrender
value necessary to provide an amount of guaranteed paid-up life
insurance at least as great as the lesser of (I) and (II), where (I) is
the amount of paid-up life insurance provided by applying the cash
surrender value to provide such paid-up insurance, computed on the basis
of an interest rate (not less than four percent) guaranteed in the
policy for this purpose, and a mortality basis (not less favorable to
the policyholder than the mortality basis specified for an insured not
medically underwritten in item (iv) of subparagraph (A) of this
paragraph) guaranteed in the policy for this purpose, and (II) is the
amount of paid-up life insurance such that the amount at risk on the
paid-up insurance is the same as the amount at risk under the policy. If
the option is elected, the portion of the cash surrender value not
applied to provide the paid-up life insurance shall be paid to the
policyholder. The guaranteed paid-up life insurance benefit may be
provided under the policy or by means of a separate single premium life
insurance policy issued by the company or an affiliate or subsidiary
thereof. For purposes of this item, the term "cash surrender value" is
after reduction for outstanding loans or other amounts due under the
policy.

(C) The surrender charge in policy years after the first shall not
exceed the maximum initial surrender charge permitted under this
subsection multiplied by the ratio of (i) the value of a life annuity
due of one dollar per year for the balance of the amortization period to
(ii) the corresponding annuity value at issue, based on the mortality
table and interest rate used in calculating the net level whole life
annual premiums. For all policies the maximum amortization period is
twenty years.

(D) Any surrender charge that is imposed on an increase in premium
payments under a policy meeting the requirements of this subsection that
does not result in any increase in face amount of the policy shall not
exceed the difference between (I) the maximum initial surrender charge
computed on the assumption that premiums were paid at the increased rate
from the date of issuance of the policy and (II) the maximum initial
surrender charge permitted under this subsection.

(4) The superintendent may issue regulations to implement this
subsection.

(5) The operative date of this subsection for a company shall be
January first, nineteen hundred eighty-eight, or the operative date of
this act for the company, whichever is earlier.

(n-2) Notwithstanding any other provision of this section, any policy
that provides for the crediting of additional amounts pursuant to
subsection (b) of section four thousand two hundred thirty-two of this
article may provide for cash surrender benefits determined in accordance
with a market-value adjustment formula, provided, however, that such
policy provides for cash surrender benefits determined without
adjustment in accordance with such a formula at specified times (which
shall not be less frequent than once every ten years after issuance of
the policy). For purposes hereof, "market-value adjustment formula"
means a formula which is described in the policy for increasing and
decreasing cash surrender values that would otherwise meet the minimum
requirements of subsection (n-1) of this section and which takes into
account (1) changes in interest rates on publicly-traded obligations or
other investments or in interest rates provided in, or declared pursuant
to, policies of the same class as the policy being surrendered and (2)
the length of time between the date on which the policy is surrendered
and the next date on which the policy would have provided cash surrender
benefits determined without the use of any market-value adjustment
formula. The superintendent may promulgate reasonable regulations to
define permissible forms or market-value adjustment formulae.

(o) (1) This section shall not apply to any of the following:

(A) Reinsurance.

(B) Group insurance.

(C) Group annuity contract.

(D) A single premium pure endowment or annuity contract.

(E) A reversionary annuity contract.

(F) A term policy of uniform amount, which provides no guaranteed
nonforfeiture or endowment benefits, or renewal thereof, of thirty years
or less expiring before age eighty-one, for which uniform premiums are
payable during the entire term of the policy.

(G) A term policy of decreasing amount, which provides no guaranteed
nonforfeiture or endowment benefits, on which each adjusted premium,
calculated as specified in subsections (g), (h), (i) and (k) hereof, 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 twenty years or less
expiring before age seventy-one, for which uniform premiums are payable
during the entire term of the policy.

(H) 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 (c), (d), (g), (h), (i) and (k)
hereof, exceeds two and one-half percent of the amount of insurance at
the beginning of the same policy year.

(I) A policy or contract delivered outside this state through an agent
or other representative of the company issuing the policy or through a
broker.

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

(p) (1) Any company may file with the superintendent a written notice
of its election to comply with the provisions of this section after a
specified date before January first, nineteen hundred forty-eight.

(2) After the filing of such notice, then upon such specified date
(which shall be the operative date for such company), this section shall
become operative with respect to the policies and contracts thereafter
issued by such company. If a company makes no such election, the
operative date of this section for such company shall be January first,
nineteen hundred forty-eight.

(q) The provisions of this section shall not apply to any policy
qualified for special tax treatment under subsection (b) of section four
hundred three of the Internal Revenue Code of 1986, as amended, to the
extent such application would prevent such qualification.