Section 930.40 Definitions

Section 930

Section 930.40  Definitions

For the purposes of this Part,

the following definitions shall apply:

a)         Buyer's Guide.  A Buyer's Guide is a document that contains

the language contained in Exhibit A or the National Association of Insurance

Commissioner's (NAIC) Life Insurance Buyer's Guide contained in Exhibit B, as

prescribed by Section 930.80 of this Part.

b)         Cash Dividend.  A Cash Dividend is the current illustrated

dividend that can be applied toward payment of the gross premium.

c)         Equivalent Level Annual Dividend.  The Equivalent Level Annual

Dividend is calculated by applying the following steps:

1)         Accumulate the annual cash dividends at five percent interest

compounded annually to the end of the tenth and twentieth policy years.

2)         Divide each accumulation of subsection (c)(1) by an interest

factor that converts it into one equivalent level annual amount that, if paid

at the beginning of each year, would accrue to the values in subsection (c)(1)

over the respective periods stipulated in subsection (c)(1).  If the period is

ten years, the factor is 13.207 and if the period is twenty years, the factor

is 34.719.

3)         Divide the results of subsection (c)(2) by the number of

thousands of the Equivalent Level Death Benefit to arrive at the Equivalent

Level Annual Dividend.

d)         Equivalent Level Death Benefit.  The Equivalent Level Death

Benefit of a policy or term life insurance rider is an amount calculated as

follows:

1)         Accumulate the guaranteed amount payable upon death,

regardless of the cause of death, at the beginning of each policy year for ten

and twenty years at five per cent interest compounded annually to the end of

the tenth and twentieth policy years respectively

ath Benefit.  The Equivalent Level Death

Benefit of a policy or term life insurance rider is an amount calculated as

follows:

1)         Accumulate the guaranteed amount payable upon death,

regardless of the cause of death, at the beginning of each policy year for ten

and twenty years at five per cent interest compounded annually to the end of

the tenth and twentieth policy years respectively.

2)         Divide each accumulation of subsection (d)(1) by an interest

factor that converts it into one equivalent level annual amount that, if paid

at the beginning of each year, would accrue to the value in subsection (d)(1)

over the respective periods stipulated in subsection (d)(1).  If the period is

ten years, the factor is 13.207 and if the period is twenty years, the factor

is 34.719.

e)         Generic Name.  Generic Name means a short title that is

descriptive of the premium and benefit patterns of a policy or a rider.

f)         Guaranteed elements means the premiums, benefits, values,

credits or charges under a policy of life insurance that are guaranteed and

determined at issue.

g)         Life Insurance Cost Indexes.

1)         Life Insurance Surrender Cost Index.  The Life Insurance

Surrender Cost Index is calculated by applying the following steps:

A)        Determine the guaranteed cash surrender value, if any.

B)        For participating policies, add the terminal dividend payable

upon surrender, if any, to the accumulation of the annual Cash Dividends at

five percent interest compounded annually to the end of the period selected and

add this sum to the amount determined in subsection (g)(1)(A).

C)        Divide the result of subsection (g)(1)(B) (subsection (g)(1)(A)

for guaranteed-cost policies) by an interest factor that converts it into an

equivalent level annual amount that, if paid at the beginning of each year,

would accrue to the value in subsection (g)(1)(B) (subsection (g)(1)(A) for

guaranteed cost policies) over the respective periods stipulated in subsection

on (g)(1)(A).

C)        Divide the result of subsection (g)(1)(B) (subsection (g)(1)(A)

for guaranteed-cost policies) by an interest factor that converts it into an

equivalent level annual amount that, if paid at the beginning of each year,

would accrue to the value in subsection (g)(1)(B) (subsection (g)(1)(A) for

guaranteed cost policies) over the respective periods stipulated in subsection

(g)(1)(A).  If the period is ten years, the factor is 13.207 and if the period

is twenty years, the factor is 34.719.

D)        Determine the equivalent level premium by accumulating each

annual premium payable for the basic policy or rider at five percent interest

compounded annually to the end of the period stipulated in subsection (g)(1)(A)

and dividing the result by the respective factors stated in subsection

(g)(1)(C) (this amount is the annual premium payable for a level premium plan).

E)        Subtract the result of subsection (g)(1)(C) from subsection

(g)(1)(D).

F)         Divide the result of subsection (g)(1)(E) by the number of

thousands of the Equivalent Level Death Benefit to arrive at the Life Insurance

Surrender Cost Index.

2)         Life Insurance Net Payment Cost Index.  The Life Insurance Net

Payment Cost Index is calculated in the same manner as the comparable Life

Insurance Cost Index except that the cash surrender value and any terminal

dividend are set at zero.

h)         Non-guaranteed elements means the premiums, benefits, values,

credits or charges under a policy of life insurance that are not guaranteed or

not determined at issue.

i)          Policy Summary.

1)         For the purposes of this Part, Policy Summary means a written

statement describing the elements of the policy including but not limited to:

A)        A prominently placed title as follows:  STATEMENT OF POLICY

COST AND BENEFIT INFORMATION

efits, values,

credits or charges under a policy of life insurance that are not guaranteed or

not determined at issue.

i)          Policy Summary.

1)         For the purposes of this Part, Policy Summary means a written

statement describing the elements of the policy including but not limited to:

A)        A prominently placed title as follows:  STATEMENT OF POLICY

COST AND BENEFIT INFORMATION.

B)        The name and address of the insurance agent, or, if no agent is

involved, a statement of the procedure to be followed in order to receive

responses to inquiries regarding the Policy Summary.

C)        The full name and home office or administrative office address

of the company in which the life insurance policy is to be or has been written.

D)        The Generic Name of the basic policy and each rider.

E)        The following amounts, where applicable, for the first five

policy years and representative policy years thereafter sufficient to clearly

illustrate the premium and benefit patterns, including, but not necessarily

limited to, the years for which Life Insurance Cost Indexes are displayed and

at least one age from 60 through 65 or maturity, whichever is earlier:

i)          The annual premium for the basic policy.

ii)         The annual premium for each optional rider.

iii)        Guaranteed amount payable upon death, at the beginning of the

policy year, regardless of the cause of death other than suicide, or other

specifically enumerated exclusions, that is provided by the basic policy and

each optional rider, with benefits provided under the basic policy and each

rider shown separately.

iv)        Total guaranteed cash surrender values at the end of the year

with, values shown separately for the basic policy and each rider.

v)         Cash dividends payable at the end of the year, with values

shown separately for the basic policy and each rider

provided by the basic policy and

each optional rider, with benefits provided under the basic policy and each

rider shown separately.

iv)        Total guaranteed cash surrender values at the end of the year

with, values shown separately for the basic policy and each rider.

v)         Cash dividends payable at the end of the year, with values

shown separately for the basic policy and each rider.  (Dividends need not be

displayed beyond the twentieth policy year.)

vi)        Guaranteed endowment amounts payable under the policy that are

not included under guaranteed cash surrender values (see subsection

(i)(1)(e)(iv)).

F)         The effective policy loan annual percentage interest rate, if

the policy contains this provision, specifying whether this rate is applied in

advance or in arrears.  If the policy loan interest rate is variable, the

Policy Summary includes the maximum annual percentage rate.

G)        Life Insurance Cost Indexes for ten and twenty years, but in no

case beyond the premium paying period.  Separate indexes are displayed for the

basic policy and for each optional term life insurance rider.  Indexes need not

be included for optional riders that are limited to benefits such as accidental

death benefits, disability waiver of premium, preliminary term life insurance

coverage of less than 12 months and guaranteed insurability benefits, nor for the

basic policies or optional riders covering more than one life.

H)        The Equivalent Level Annual Dividend, in the case of

participating policies and participating optional term life insurance riders,

under the same circumstances and for the same durations at which Life Insurance

Cost Indexes are displayed.

I)         A Policy Summary that includes dividends shall also include a

statement that dividends are based on the company's current dividend scale and

are not guaranteed

Level Annual Dividend, in the case of

participating policies and participating optional term life insurance riders,

under the same circumstances and for the same durations at which Life Insurance

Cost Indexes are displayed.

I)         A Policy Summary that includes dividends shall also include a

statement that dividends are based on the company's current dividend scale and

are not guaranteed

. When using

Exhibit A, the Policy Summary must be accompanied by

a statement in

close proximity to the Equivalent Level Annual Dividend as follows:  An

explanation of the intended use of the Equivalent Level Annual Dividend is

included in the Life Insurance Buyer's Guide.

J)         When using Exhibit A, a statement in close proximity to the

Life Insurance Cost Indexes as follows:  An explanation of the intended use of

these indexes is provided in the Life Insurance Buyer's Guide.

K)        The date on which the Policy Summary is prepared.

2)         The Policy Summary must consist of a separate document.  All

information required to be disclosed must be set out in such a manner as to not

minimize or render any portion thereof obscure.  Any amounts that remain level

for two or more years of the policy may be represented by a single number if it

is clearly indicated what amounts are applicable for each policy year. Amounts

in subsection (i)(1)(E) shall be listed in total, not on a per thousand nor per

unit basis.  If more than one insured is covered under one policy or rider,

guaranteed death benefits shall be displayed separately for each insured or for

each class of insureds if death benefits do not differ within the class.  Zero

amounts shall be displayed as zero and shall not be displayed as a blank space.

j)          Preneed Funeral Contract or Prearrangement.  An agreement by

or for an individual before that individual's death relating to the purchase or

provision of specific funeral or cemetery merchandise or services.