Standard Nonforfeiture Law for Life Insurance

V.S.A. tit. 8, ch. 103, subch. 3B

in effect

8 V.S.A. § 3760 Title

3760. Title This subchapter shall be known as the Standard Nonforfeiture Law for Life Insurance. Added 2015, No. 63, § 2, eff. June 17, 2015.

3761. Definitions As used in this subchapter, “operative date of the Valuation Manual” means January 1 of the first calendar year that the Valuation Manual as defined in subchapter 4A of this chapter is effective. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3762 Nonforfeiture benefits

3762. Nonforfeiture benefits (a) In the case of policies issued on or after the effective date of this subchapter, as defined in section 3773 of this subchapter, a policy of life insurance, except as stated in section 3772 of this subchapter, shall not be delivered or issued for delivery in this State unless it contains in substance the following provisions, or corresponding provisions that, in the opinion of the Commissioner, are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this section and are essentially in compliance with section 3771 of this subchapter. (1) In the event of default in any premium payment, the company shall grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of such amount as may be specified in this section. In lieu of the stipulated paid-up nonforfeiture benefit, the company may substitute, upon proper request not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or earlier payment of endowment benefits. (2) 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 three full years in the case of ordinary insurance or five full years in the case of industrial insurance, the company shall pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of an amount as may be specified in this section. (3) A specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make the election elects another available option not later than 60 days after the due date of the premium in default. (4) If the policy becomes paid-up by completion of all premium payments or if it is continued under any paid-up nonforfeiture benefit that 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 shall pay upon surrender of the policy within 30 days after any policy anniversary, a cash surrender value of an amount as may be specified in this section. (5) If a policy causes, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums, or provides an option for changes in benefits or premiums, other than a change to a new policy, the company shall provide the policyholder 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 company shall provide to its policyholders 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. (6) A company shall provide 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 a paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which values and benefits are consecutively shown in the policy. (b) Any of the provisions in subsection (a) of this section, or portions thereof, not applicable by reason of the plan of insurance may be omitted from the policy, to the extent inapplicable. (c) 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. (d) No individual policy of life insurance covering an individual 64 years of age or older that has been in force for at least one year shall be canceled for nonpayment of premium unless, after expiration of the grace period and not less than 21 days before the effective date of any such cancellation, the insurer has mailed a notice of impending cancellation in coverage to the policyholder and to a specified secondary addressee if such addressee has been designated by name and address in writing by the policyholder. An insurer shall notify the applicant of the right to designate a secondary addressee at the time of application for the policy on a form provided by the insurer, and annually thereafter, and the policyholder shall have the right to designate a secondary addressee, in writing, by name and address, at any time the policy is in force, by submitting such written notice to the insurer. If a life insurance policy provides a grace period longer than 51 days for nonpayment of premium, the notice of cancellation in coverage required by this subsection shall be mailed to the policyholder and to the secondary addressee not less than 21 days prior to the expiration of the grace period provided in such policies. Added 2015, No. 63, § 2, eff. June 17, 2015; amended 2017, No. 80, § 1.

8 V.S.A. § 3763 Computation of cash surrender value

3763. Computation of cash surrender value (a) 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 section 3762 of this subchapter, shall be an amount not less than the excess, if any, of the present value, on the anniversary, of the future guaranteed benefits that would have been provided for by the policy, including any existing paid-up additions, if there had been no default, over the sum of: (1) the then present value of the adjusted premiums as defined in sections 3765-3768 of this subchapter, corresponding to premiums that would have fallen due on and after the anniversary; and (2) the amount of any indebtedness to the company on the policy. (b) Notwithstanding subsection (a) of this section, for a policy issued on or after the operative date of section 3768 of this subchapter that 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 subsection (a) of this section shall be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without the rider or supplemental policy provision and the cash surrender value as defined in subsection (a) of this section for a policy that provides only the benefits otherwise provided by such rider or supplemental policy provision. (c) For a family policy issued on or after the operative date of section 3768 of this subchapter that defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse turns 71 years of age, the cash surrender value referred to in subsection (a) of this section shall be an amount not less than the sum of the cash surrender value for an otherwise similar policy issued at the same age without term insurance on the life of the spouse and the cash surrender value as defined in subsection (a) of this section for a policy that provides only the benefits otherwise provided by term insurance on the life of the spouse. (d) A 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 under section 3762 of this subchapter, shall be an amount not less than the present value, on the anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the company on the policy. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3764 Computation of paid-up nonforfeiture benefits

3764. Computation of paid-up nonforfeiture benefits A paid-up nonforfeiture benefit available under a policy in the event of default in a premium payment due on any policy anniversary shall be such that its present value as of the 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 that would have been required under this subchapter in the absence of the condition that premiums shall have been paid for at least a specified period. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3765 Calculation of adjusted premiums

3765. Calculation of adjusted premiums (a)(1) This section shall not apply to policies issued on or after the operative date of section 3768 of this subchapter. Except as provided in subsection (c) of this section, 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 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: (A) the then present value of the future guaranteed benefits provided for by the policy; (B) 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; (C) 40 percent of the adjusted premium for the first policy year; and (D) 25 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. (2) In applying the percentages specified in subdivisions (1)(C) and (D) of this subsection, no adjusted premium shall be deemed to exceed four percent of the amount of insurance or level amount equivalent. The date of issue of a policy for the purpose of this section shall be the date as of which the rated age of the insured is determined. (b) In the case of a policy providing an amount of insurance varying with duration of the policy, the equivalent level amount for the purpose of this section 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. (c)(1) 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. (2) Subdivisions (1)(A) and (B) of this subsection shall be calculated separately except that, for purposes of subdivisions (a)(1)(B)-(D) of this section, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in subdivision (a)(1)(B) of this section 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 subdivision (1) of this subsection (c). (d) Except as otherwise provided in sections 3766 and 3767 of this subchapter, all adjusted premiums and present values referred to in this subchapter 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 any age not more than three 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 three and one-half percent 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 percent of the rates of mortality according to the applicable table. Provided, further, that for insurance issued on a substandard basis, the calculation of any 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 Commissioner. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3766 Calculation of adjusted premiums; ordinary policies

3766. Calculation of adjusted premiums; ordinary policies (a) This section does not apply to ordinary policies issued on or after the operative date of section 3768 of this subchapter. In the case of ordinary policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in this subchapter 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 three and one-half percent per annum, except that a rate of interest not exceeding four percent per annum may be used for policies issued on or after April 12, 1973, and prior to January 1, 1980, and a rate of interest not exceeding five and one-half percent per annum may be used for policies issued on or after January 1, 1980, except that for any single premium whole life or endowment insurance policy, a rate of interest not exceeding six and one-half percent per annum may be used, 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. 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 not be more than those shown in the Commissioners’ 1958 Extended Term Insurance Table. For insurance issued on a substandard basis, the calculation of any 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 Commissioner. (b) After the effective date of this section, any company may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1966. After the filing of such notice, upon the specified date (which shall be the operative date of this section for that company), this section shall become operative with respect to the ordinary policies thereafter issued by the company. If a company makes no election, the operative date of this section for the company shall be January 1, 1966. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3767 Calculation of adjusted premiums; industrial policies

3767. Calculation of adjusted premiums; industrial policies (a) This section does not apply to industrial policies issued on or after the operative date of section 3768 of this subchapter. In the case of industrial policies issued on or after the operative date of this section, all adjusted premiums and present values referred to in this subchapter 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 three and one-half percent per annum, except that a rate of interest not exceeding four percent per annum may be used for policies issued on or after April 12, 1973, and prior to January 1, 1980, and a rate of interest not exceeding five and one-half percent per annum may be used for policies issued on or after January 1, 1980, except that for any single premium whole life or endowment insurance policy, a rate of interest not exceeding six and one-half percent per annum may be used. 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. 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 Commissioner. (b) After the effective date of this section, any company may file with the Commissioner a written notice of its election to comply with the provisions of this section after a specified date before January 1, 1968. After the filing of such notice, upon the specified date, which shall be the operative date of this section for that company, this section shall become operative with respect to the industrial policies thereafter issued by the company. If a company makes no election, the operative date of this section for the company shall be January 1, 1968. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3768 Calculations of adjusted premiums by the nonforfeiture net level premium method

3768. Calculations of adjusted premiums by the nonforfeiture net level premium method (a)(1) This section shall apply to all policies issued on or after the operative date of this section. Except as provided in subsection (g) of this section, 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: (A) the then present value of the future guaranteed benefits provided for by the policy; (B) 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 10 policy years; and (C) 125 percent of the nonforfeiture net level premium as defined in this section. (2) In applying the percentage specified in subdivision (1)(C) of this subsection, 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 10 policy years. The date of issue of a policy for the purpose of this section shall be the date as of which the rated age of the insured is determined. (b) 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 the policy on which a premium falls due. (c) In the case of policies that cause, on a basis guaranteed in the policy, unscheduled changes in benefits or premiums, or that provide an option for changes in benefits or premiums, other than a change to a new policy, the adjusted premiums and present values shall be calculated initially on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of any change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change. (d) Except as otherwise provided in subsection (g) of this section, the recalculated future adjusted premiums for any policy shall be the 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: (1) the sum of: (A) the then present value of the then future guaranteed benefits provided for by the policy; and (B) the additional expense allowance, if any; over (2) the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under this policy. (e) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of: (1) one percent 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 (2) 125 percent of the increase, if positive, in the nonforfeiture net level premium. (f) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing the sum arrived at under subdivision (1) of this subsection by the value specified in subdivision (2) of this subsection. (1) As used in this subsection, “sum” means: (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; plus (B) the present value of the increase in future guaranteed benefits provided for by the policy. (2) As used in this subsection, “value” means 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 section to the contrary, in the case of a policy issued on a substandard basis that provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis that provides higher uniform amount of insurance, adjusted premiums and present values for the substandard policy may be calculated as if it were issued to provide higher uniform amounts of insurance on the standard basis. (h) All adjusted premiums and present values referred to in this subchapter 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, shall for all policies of industrial insurance be calculated on the basis of the Commissioners’ 1961 Standard Industrial Mortality Table, 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 section, for policies issued in that calendar year, provided that: (1) 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 section, for policies issued in the immediately preceding calendar year. (2) Under a paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, whether or not required by section 3762 of this subchapter, 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. (3) 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. (4) 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 for policies of ordinary insurance and not more than the Commissioners’ 1961 Industrial Extended Term Insurance Table for policies of industrial insurance. (5) For insurance issued on a substandard basis, the calculation of any adjusted premiums and present values may be based on appropriate modifications of the aforementioned tables. (6)(A) For policies issued prior to the operative date of the Valuation Manual defined in subchapter 4A or this chapter, any Commissioners’ Standard Ordinary Mortality Tables, adopted after 1980 by the National Association of Insurance Commissioners, approved by rule adopted by the Commissioner for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners’ 1980 Standard Ordinary Mortality Table with or without 10-Year Select Mortality Factors or for the Commissioners’ 1980 Extended Term Insurance Table. (B) For policies issued on or after the operative date of the Valuation Manual, the Valuation Manual shall provide the Commissioners’ Standard Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners’ 1980 Standard Ordinary Mortality Table with or without 10-Year Select Mortality Factors or for the Commissioners’ 1980 Extended Term Insurance Table. If the Commissioner adopts by rule a Commissioners’ Standard Ordinary Mortality Table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the Valuation Manual, then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard provided by the Valuation Manual. (7)(A) For policies issued prior to the operative date of the Valuation Manual, any Commissioners’ Standard Industrial Mortality Tables, adopted after 1980 by the NAIC, approved by rule adopted by the Commissioner 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. (B) For policies issued on or after the operative date of the Valuation Manual, the Valuation Manual shall provide the Commissioners’ Standard Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners’ 1961 Standard Industrial Mortality Table or the Commissioners’ 1961 Industrial Extended Term Insurance Table. If the Commissioner adopts by rule a Commissioners’ Standard Industrial Mortality Table adopted by the NAIC for use in determining the minimum nonforfeiture standard for policies issued on or after the 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: (1) 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 percent of the calendar year statutory valuation interest rate for such policy as defined under subchapter 4A of this chapter, rounded to the nearer one quarter of one percent, provided the nonforfeiture interest rate shall not be less than four percent. (2) 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 of law to the contrary, any refiling of nonforfeiture values or their methods of computation for any previously approved policy form that 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 section, any company may file with the Commissioner a written notice of its election to comply with the provision of this section after a specified date before January 1, 1989, which shall be the operative date of this section for the company. If a company makes no election, the operative date of this section for the company shall be January 1, 1989. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3769 Nonforfeiture benefits for indeterminate premium plans

3769. Nonforfeiture benefits for indeterminate premium plans In the case of any plan of life insurance that provides for future premium determination, the amounts of that are to be determined by the insurance company based on estimates of future experience, or in the case of any plan of life insurance that is of such a nature that minimum values cannot be determined by the methods described in sections 3762-3768 of this subchapter: (1) The Commissioner 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 sections 3762-3768 of this subchapter. (2) The Commissioner 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 Standard Nonforfeiture Law for Life Insurance, as determined by subchapter 4A of this chapter and any rules adopted thereunder. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3770 Proration of values; net value of paid-up additions

3770. Proration of values; net value of paid-up additions Any cash surrender value and any paid-up nonforfeiture benefit available under a 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 sections 3763-3768 of this subchapter 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 not be less than the amounts used to provide such additions. Notwithstanding the provisions of section 3763 of this subchapter, additional benefits shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required under this subchapter, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits. As used in this section, “additional benefits” means benefits payable: (1) in the event of death or dismemberment by accident or accidental means; (2) in the event of total and permanent disability; (3) as reversionary annuity or deferred reversionary annuity benefits; (4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this subchapter would not apply; (5) as term insurance in the life on a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child turns 26 years of age, is uniform in amount after the child’s age is one year of age, and has not become paid-up by reason of the death of a parent of the child; or (6) as other policy benefits additional to life insurance and endowment benefits, and premiums for all such additional benefits. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3771 Consistency of progression of cash surrender values with increasing policy duration

3771. Consistency of progression of cash surrender values with increasing policy duration (a) This section, in addition to all other applicable sections of this chapter, 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 that 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 10 policy years, from the sum of: (1) the greater of zero and the basic cash value specified in this section; and (2) the present value of any existing paid-up additions less the amount of any indebtedness to the company under the policy. (b) The basic cash value shall be equal to the present value, on such anniversary, of the future guaranteed benefits that 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 defined in this subchapter, corresponding to premiums that would have fallen due on and after the anniversary. The effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in section 3763 or 3765 of this subchapter, whichever is applicable, shall be the same as the effects specified in those sections, as applicable, on the cash surrender values defined therein. (c) 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 section 3765 or section 3768 of this subchapter, as applicable, except that the percentage: (1) must be the same percentage for each policy year between the second policy anniversary and the later of: (A) the fifth policy anniversary; or (B) 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 10 policy years; and (2) must be such that no percentage after the later of the two policy anniversaries specified in subsection (a) of this section may apply to fewer than five consecutive policy years. (d) Basic cash value shall not be less than the value that would be obtained if the adjusted premiums for the policy, as defined in section 3768 of this subchapter, were substituted for the nonforfeiture factors in the calculation of the basic cash value. (e) All adjusted premiums and present values referred to in this section 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 sections of this subchapter. The cash surrender values referred to in this section shall include any endowment benefits provided for by the policy. (f) A 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 sections 3762, 3763, 3764, 3768, and 3770 of this subchapter. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed in subdivisions 3770(1)-(6) of this subchapter shall conform with the principles of this section. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3772 Exceptions

3772. Exceptions (a) This subchapter shall not apply to: (1) reinsurance; (2) group insurance; (3) pure endowment; (4) an annuity or reversionary annuity contract; (5) a term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of 20 years or less expiring before 71 years of age, for which uniform premiums are payable during the entire term of the policy; (6) a term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in section 3765, 3766, 3767, or 3768 of this subchapter, is less than the adjusted premium so calculated, on a term policy of uniform amount, or renewal thereof, that 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 71 years of age, for which uniform premiums are payable during the entire term of the policy; (7) 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 section 3763, 3764, 3765, 3766, 3767, or 3768 of this subchapter, exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year; nor (8) a policy delivered outside this State through an agent or other representative of the company issuing the policy. (b) For purposes of determining the applicability of this subchapter, the age at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life. Added 2015, No. 63, § 2, eff. June 17, 2015.

8 V.S.A. § 3773 Effective date; applicability

3773. Effective date; applicability After the effective date of this subchapter, any company may file with the Commissioner a written notice of its election to comply with the provisions of this subchapter after a specified date before January 1, 1948. After the filing of such notice, then upon the specified date (which shall be the operative date for the company), this subchapter shall become operative with respect to the policies thereafter issued by the company. If a company makes no such election, the operative date of this subchapter for the company shall be January 1, 1948. Added 2015, No. 63, § 2, eff. June 17, 2015.

Source: Vermont General Assembly (legislature.vermont.gov)URL: https://legislature.vermont.gov/statutes/chapter/08/103Fetched: 10/21/2026