MDL-808

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2014

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

Table of Contents

Section 1. Title

Section 1a. Definitions

Section 2. Nonforfeiture Benefits

Section 3. Computation of Cash Surrender Value

Section 4. Computation of Paid-Up Nonforfeiture Benefits

Section 5. Calculation of Adjusted Premiums

Section 5a. Calculation of Adjusted Premiums - Ordinary Policies

Section 5b. Calculation of Adjusted Premiums - Industrial Policies

Section 5c. Calculation of Adjusted Premiums By the Nonforfeiture Net Level

Premium Method

Section 6. Nonforfeiture Benefits for Indeterminate Premium Plans

Section 7. Proration of Values; Net Value or Paid-Up Additions

Section 8. Consistency of Progression of Cash Surrender Values with

Increasing Policy Duration

Section 9. Exceptions

Section 10. Effective Date

Section 1. Title

This Act shall be known as the Standard Nonforfeiture Law for Life Insurance.

Section 1a. Definitions

The term “operative date of the valuation manual” means the January 1 of the first calendar year that the valuation manual as

defined in the [insert reference to the state’s Standard Valuation Law incorporating the National Association of Insurance

Commissioners’ 2009 Amendments] is effective.

Section 2. Nonforfeiture Benefits

In the case of policies issued on and after the operative date of this Act as defined in Section 10, no policy of life insurance,

except as stated in Section 9, 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 commissioner are at least as favorable to the

defaulting or surrendering policyholder as are the minimum requirements specified here and are essentially in compliance

with Section 8 of this law:

A. That, in the event of default in any premium payment, the company will grant, upon proper request not later

than sixty (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 hereinafter specified. In lieu

of the stipulated paid-up nonforfeiture benefit, the company may substitute, upon proper request not later

than sixty (60) days after the due date of the premium in default, an actuarially equivalent alternative paid-

up nonforfeiture benefit which provides a greater amount or longer period of death benefits or, if

applicable, a greater amount or earlier payment of endowment benefits.

B. That, upon surrender of the policy within sixty (60) days after the due date of any premium payment in

default after premiums have been paid for at least three (3) full years in the case of ordinary insurance or

five (5) full years in the case of industrial insurance, the company will pay, in lieu of any paid-up

nonforfeiture benefit, a cash surrender value of such amount as may be hereinafter specified.

C. That 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 sixty (60) days after the

due date of the premium in default.

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D. That if the policy shall have become paid-up by completion of all premium payments or if it is continued

under any paid-up nonforfeiture benefit which became effective on or after the third policy anniversary in

the case of ordinary insurance or the fifth policy anniversary in the case of industrial insurance, the

company will pay, upon surrender of the policy within thirty (30) days after any policy anniversary, a cash

surrender value of such amount as may be hereinafter specified.

E. In the case of policies which cause, on a basis guaranteed in the policy, unscheduled changes in benefits or

premiums, or which provide an option for changes in benefits or premiums other than a change to a new

policy; a statement of the mortality table, interest rate and method used in calculating cash surrender values

and the paid-up nonforfeiture benefits available under the policy. In the case of all other policies, a

statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-

up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value,

if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary

either during the first twenty (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.

F. A statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy

are not less than the minimum values and benefits required by or pursuant to the insurance law of the state

in which the policy is delivered; an explanation of the manner in which the cash surrender values and the

paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or

any indebtedness to the company on the policy; if a detailed statement of the method of computation of the

values and benefits shown in the policy is not stated therein, a statement that such method of computation

has been filed with the insurance supervisory official of the state in which the policy is delivered; and a

statement of the method to be used in calculating the cash surrender value and 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.

Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may, to the extent

inapplicable, be omitted from the policy.

The company shall reserve the right to defer the payment of any cash surrender value for a period of six (6) months after

demand therefor with surrender of the policy.

Section 3. 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 2, shall be an amount not less than the excess, if

any, of the present value, on the 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:

(1) The then present value of the adjusted premiums as defined in Sections 5, 5a, 5b and 5c,

corresponding to premiums which would have fallen due on and after the anniversary; and

(2) The amount of any indebtedness to the company on the policy.

B. Provided, however, that for any policy issued on or after the operative date of Section 5c, 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 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 for a policy which provides only the benefits otherwise provided by such

rider or supplemental policy provision.

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2014

C. Provided, further, that for any family policy issued on or after the operative date of Section 5c, 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 (71), the cash surrender value referred to in Subsection A 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 for a policy which provides only the benefits otherwise provided by term insurance on the life

of the spouse.

D. Any cash surrender value available within thirty (30) days after any policy anniversary under any policy

paid-up by completion of all premium payments or any policy continued under any paid-up nonforfeiture

benefit, whether or not required by Section 2, 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.

Section 4. Computation of Paid-Up Nonforfeiture Benefits

Any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due on any policy

anniversary shall be such that its present value as of 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 which would have been required by this Act

in the absence of the condition that premiums shall have been paid for at least a specified period.

Section 5. Calculation of Adjusted Premiums

A. This section shall not apply to policies issued on or after the operative date of Section 5c. 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:

(1) The then present value of the future guaranteed benefits provided for by the policy;

(2) Two percent (2%) of the amount of insurance, if the insurance be uniform in amount, or of the

equivalent uniform amount, as hereinafter defined, if the amount of insurance varies with duration

of the policy;

(3) Forty percent (40%) of the adjusted premium for the first policy year;

(4) Twenty-five percent (25%) of either the adjusted premium for the first policy year or the adjusted

premium for a whole life policy of the same uniform or equivalent uniform amount with uniform

premiums for the whole of life issued at the same age for the same amount of insurance,

whichever is less.

Provided, however, that in applying the percentages specified in (3) and (4) above, no adjusted premium

shall be deemed to exceed four percent (4%) 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. The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy

provision shall be equal to:

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(1) 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

(2) The adjusted premiums for such term insurance,

the foregoing Paragraphs (1) and (2) being calculated separately and as specified in Subsections A and B

except that, for the purposes of Subsection A(2), A(3) and A(4), the amount of insurance or equivalent

uniform amount of insurance used in the calculation of the adjusted premiums referred to in

Subsection A(2) 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 Subsection C(1).

D. Except as otherwise provided in Sections 5a and 5b, all adjusted premiums and present values referred to in

this Act 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 (3)

years younger than the actual age of the insured and such calculations for all policies of industrial insurance

shall be made on the basis of the 1941 Standard Industrial Mortality Table. All calculations shall be made

on the basis of the rate of interest, not exceeding three and one-half percent (3 1/2%) per annum, specified

in the policy for calculating cash surrender values and paid-up nonforfeiture benefits. Provided, however,

that in calculating the present value of any paid-up term insurance with accompanying pure endowment, if

any, offered as a nonforfeiture benefit, the rates of mortality assumed may be not more than one hundred

and thirty percent (130%) 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.

Section 5a. Calculation of Adjusted Premiums - Ordinary Policies

This section shall not apply to ordinary policies issued on or after the operative date of Section 5c. 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 Act

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 (3 1/2%) per annum except that a rate of interest not exceeding four

percent (4%) per annum may be used for policies issued on or after [insert effective date of 1972 NAIC amendments to the

Standard Nonforfeiture Law for Life Insurance] and prior to [insert effective date of 1976 NAIC amendments to the Standard

Nonforfeiture Law for Life Insurance] and a rate of interest not exceeding five and one-half percent (5 1/2%) per annum may

be used; for policies issued on or after [insert effective date of 1976 NAIC amendments to the Standard Nonforfeiture Law

for Life Insurance], except that for any single premium whole life or endowment insurance policy, a rate of interest not

exceeding six and one-half percent (6 1/2%) per annum may be used; and provided that for any category of ordinary

insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than

six (6) years younger than the actual age of the insured. Provided, however, that in calculating the present value of any paid-

up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality

assumed may be not more than those shown in the Commissioners 1958 Extended Term Insurance Table. Provided, 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.

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.

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2014

Section 5b. Calculation of Adjusted Premiums - Industrial Policies

This section shall not apply to industrial policies issued on or after the operative date of Section 5c. 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 Act

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 (3 1/2%) per annum, except that a rate of interest not exceeding four

percent (4%) per annum may be used for policies issued on or after [insert effective date of 1972 NAIC amendments to the

Standard Nonforfeiture Law for Life Insurance] and prior to [insert effective date of 1976 NAIC amendments to the Standard

Nonforfeiture Law for Life Insurance] and a rate of interest not exceeding five and one-half percent (5 1/2%) per annum may

be used for policies issued on or after [insert effective date of 1976 NAIC amendments to the Standard Nonforfeiture Law for

Life Insurance], except that for any single premium whole life or endowment insurance policy a rate of interest not exceeding

six and one-half percent (6 1/2%) per annum may be used. Provided, however, that in calculating the present value of any

paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality

assumed may be not more than those shown in the Commissioners 1961 Industrial Extended Term Insurance Table.

Provided, further, that for insurance issued on a substandard basis, the calculations of any such adjusted premiums and

present values may be based on such other table of mortality as may be specified by the company and approved by the

commissioner.

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.

Section 5c. Calculations of Adjusted Premiums By the Nonforfeiture Net Level Premium Method

A. This section shall apply to all policies issued on or after the operative date of this section. Except as

provided in Subsection G, the adjusted premiums for any policy shall be calculated on an annual basis and

shall be such uniform percentage of the respective premiums specified in the policy for each policy year,

excluding amounts payable as extra premiums to cover impairments or special hazards and 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:

(1) The then present value of the future guaranteed benefits provided for by the policy;

(2) 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 (10) policy years; and

(3) One hundred twenty-five percent (125%) of the nonforfeiture net level premium as hereinafter

defined.

Provided, however, that in applying the percentage specified in (3) above no nonforfeiture net level

premium shall be deemed to exceed four percent (4%) 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 (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.

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C. 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 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, the recalculated future adjusted premiums for any policy

shall be 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 ten (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 ten (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) One hundred twenty-five percent (125%) 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 (1) by (2)

where

(1) Equals the sum of

(a) The nonforfeiture net level premium applicable prior to the change times the present

value of an annuity of one per annum payable on each anniversary of the policy on or

subsequent to the date of the change on which a premium would have fallen due had the

change not occurred, and

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

and

(2) 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.

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2014

G. Notwithstanding any other provisions of this section 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, the

policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which

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 Act 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, however, 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 any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash

surrender value available, whether or not required by Section 2, 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) For policies issued prior to the operative date of the valuation manual, any Commissioners

Standard ordinary mortality tables, adopted after 1980 by the National Association of Insurance

Commissioners, that are approved by regulation promulgated 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 Ten-Year Select Mortality Factors or for the

Commissioners 1980 Extended Term Insurance Table.

For policies issued on or after the operative date of the valuation manual the valuation manual

shall provide the Commissioners Standard mortality table for use in determining the minimum

nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary

Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980

Extended Term Insurance Table. If the commissioner approves by regulation any Commissioners

Standard ordinary mortality table adopted by the National Association of Insurance

Commissioners for use in determining the minimum nonforfeiture standard for policies issued on

or after the operative date of the valuation manual then that minimum nonforfeiture standard

supersedes the minimum nonforfeiture standard provided by the valuation manual.

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(7) For policies issued prior to the operative date of the valuation manual, any Commissioners

Standard industrial mortality tables, adopted after 1980 by the National Association of Insurance

Commissioners, that are approved by regulation promulgated 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.

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 approves by regulation any Commissioners Standard industrial mortality table

adopted by the National Association of Insurance Commissioners for use in determining the

minimum nonforfeiture standard for policies issued on or after the operative date of the valuation

manual then that minimum nonforfeiture standard supersedes the minimum nonforfeiture standard

provided by the valuation manual.

I. The nonforfeiture interest rate is defined below:

(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 one hundred

and twenty-five percent (125%) of the calendar year statutory valuation interest rate for such

policy as defined in the Standard Valuation Law, rounded to the nearer one quarter of one percent

(1/4 of 1%), provided, however, that the nonforfeiture interest rate shall not be less than four

percent (4.00%).

Drafting Note: For flexible premium universal life insurance policices as defined in Section 3D of the Universal Life Insurance Model Regulation (#585),

this is not intended to prevent an interest rate guarantee less than the nonforfeiture interest rate.

(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 in this code to the contrary, any refiling of nonforfeiture values or

their methods of computation for any previously approved policy form which involves only a change in the

interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other

provisions of that policy form.

K. After the effective date of this 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.

Section 6. Nonforfeiture Benefits for Indeterminate Premium Plans

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 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 Sections 2, 3, 4, 5, 5a, 5b

or 5c, then:

A. 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 2, 3, 4, 5, 5a, 5b or

5c;

B. 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;

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2014

C. 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 regulations promulgated by the

commissioner;

Drafting Note: If desired the following provision may be added as Subsection D.

D. Notwithstanding any other provision in the laws of this state, any policy, contract or certificate providing

life insurance under any plan must be affirmatively approved by the commissioner before it can be

marketed, issued, delivered or used in this state.

Drafting Note: If Subsection D is enacted in a state where prior filing and approval of life insurance policy forms has not been previously required by

statute, this subsection would mandate such action for plans requiring approval under Section 6. If Subsection D is enacted in a state where approval is

deemed under certain circumstances, the deemer provision would be overridden by the terms of this section. In some states specific reference must be made

to any statutory provision which is overridden.

Section 7. Proration of Values; Net Value of Paid-Up Additions

Any cash surrender value and any paid-up nonforfeiture benefit, available under the policy in the event of default in a

premium payment due at any time other than on the policy anniversary, shall be calculated with allowance for the lapse of

time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in Sections

3, 4, 5, 5a, 5b and 5c 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 3, additional benefits payable:

A. In the event of death or dismemberment by accident or accidental means;

B. In the event of total and permanent disability;

C. As reversionary annuity or deferred reversionary annuity benefits;

D. As term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a

separate policy, this Act would not apply;

E. 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'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

F. As other policy benefits additional to life insurance and endowment benefits, and premiums for all such

additional benefits,shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits

required by this Act, and no such additional benefits shall be required to be included in any paid-up

nonforfeiture benefits.

Section 8. Consistency of Progression of Cash Surrender Values with Increasing Policy Duration

This section, in addition to all other applicable sections of this law, shall apply to all policies issued on or after January 1, 19[ ]

[insert the fourth calendar year commencing after the effective date of the amendatory Act of 19--]. 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 (.2%) 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 (10) policy years, from the sum

of:

A. The greater of zero and the basic cash value hereinafter specified; and

B. The present value of any existing paid-up additions less the amount of any indebtedness to the company

under the policy.

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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 defined in this Act,

corresponding to premiums which would have fallen due on and after the 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 Section 3 or 5,

whichever is applicable, shall be the same as the effects specified in Section 3 or 5, whichever is applicable, on the cash

surrender values defined in that section.

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 5 or 5c, whichever is applicable. Except as is required by the next succeeding sentence of this

section, the percentage:

A. Must be the same percentage for each policy year between the second policy anniversary and the later of:

(1) The fifth policy anniversary; and

(2) 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 (.2%) 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 (10) policy

years; and

B. Must be such that no percentage after the later of the two policy anniversaries specified in Subsection A

may apply to fewer than five (5) 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 Section 5c, were substituted for the nonforfeiture factors in the calculation of the basic cash value.

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 law. The cash

surrender values referred to in this section shall include any endowment benefits provided for by the policy.

Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and

the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall

be determined in manners consistent with the manners specified for determining the analogous minimum amounts in Sections

2, 3, 4, 5c and 7. 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 Section 7A through 7F shall conform with the principles of this section.

Section 9. Exceptions

This Act shall not apply to any of the following:

A. Reinsurance;

B. Group insurance;

C. Pure endowment;

D. Annuity or reversionary annuity contract;

E. A term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or

renewal thereof, of twenty (20) years of less expiring before age seventy-one (71), for which uniform

premiums are payable during the entire term of the policy;

NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2014

F. A term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits,

on which each adjusted premium, calculated as specified in Sections 5, 5a, 5b and 5c, 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 (20) years or less expiring before age seventy-one (71), for which

uniform premiums are payable during the entire term of the policy;

G. A policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender

value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year,

calculated as specified in Sections 3, 4, 5, 5a, 5b and 5c, exceeds two and one-half percent (2 1/2%) of the

amount of insurance at the beginning of the same policy year; nor

H. Policy which shall be delivered outside this state through an agent or other representative of the company

issuing the policy.

For purposes of determining the applicability of this Act, the age at expiry for a joint term life insurance policy shall be the

age at expiry of the oldest life.

Section 10. Effective Date

After the effective date of this Act, any company may file with the commissioner a written notice of its election to comply

with the provisions of this Act 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 Act shall become operative with respect to the

policies thereafter issued by such company. If a company makes no such election, the operative date of this Act for the

company shall be January 1, 1948.

________________________________

Chronological Summary of Actions (all references are to the Proceedings of the NAIC).

1942 Proc. Supp. 266-270 (text).

1943 Proc. 13 (adopted).

1947 Proc. 250, 253-254, 261 (amended).

1959 Proc. I 183, 193, 197-202, 294 (amended).

1960 Proc. II 518, 536-537, 538 (amended).

1962 Proc. I 140, 144, 145-146, 166 (amended).

1973 Proc. I 9, 11, 251, 277, 279, 284 (amended).

1973 Proc. II 533, 546-549 (reprinted).

1974 Proc. II 461-466 (reprinted).

1977 Proc. II, 19, 21, 432, 494, 560 (corrected).

1981 Proc. I 47, 51, 421, 517, 761, 774-782 (amended and reprinted).

1981 Proc. II 27, 35, 559, 793, 794 (amended).

2012 Proc. 2

Quarter, Vol I, 121-133, 171, 391, 403 (amended).

2013 Proc. 3

Quarter, Vol I, 121-124, 135-138, 159, 226, 319, 348, 362, 496, 505, 519 (amended).

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NAIC Model Laws, Regulations, Guidelines and Other Resources—Fall 2019

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

This chart is intended to provide readers with additional information to more easily access state statutes, regulations,

bulletins or administrative rulings related to the NAIC model. Such guidance provides readers with a starting point

from which they may review how each state has addressed the model and the topic being covered. The NAIC Legal

Division has reviewed each state’s activity in this area and has determined whether the citation most appropriately fits

in the Model Adoption column or Related State Activity column based on the definitions listed below. The NAIC’s

interpretation may or may not be shared by the individual states or by interested readers.

This chart does not constitute a formal legal opinion by the NAIC staff on the provisions of state law and should not be

relied upon as such. Nor does this state page reflect a determination as to whether a state meets any applicable

accreditation standards. Every effort has been made to provide correct and accurate summaries to assist readers in

locating useful information. Readers should consult state law for further details and for the most current information.

NAIC Model Laws, Regulations, Guidelines and Other Resources—Fall 2019

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

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NAIC Model Laws, Regulations, Guidelines and Other Resources—Fall 2019

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

KEY:

MODEL ADOPTION: States that have citations identified in this column adopted the most recent version of the NAIC model

in a substantially similar manner. This requires states to adopt the model in its entirety but does allow for variations in style

and format. States that have adopted portions of the current NAIC model will be included in this column with an explanatory

note.

RELATED STATE ACTIVITY: Examples of Related State Activity include but are not limited to: older versions of the

NAIC model, statutes or regulations addressing the same subject matter, or other administrative guidance such as bulletins and

notices. States that have citations identified in this column only (and nothing listed in the Model Adoption column) have not

adopted the most recent version of the NAIC model in a substantially similar manner.

NO CURRENT ACTIVITY: No state activity on the topic as of the date of the most recent update. This includes states that

have repealed legislation as well as states that have never adopted legislation.

NAIC MEMBER

MODEL ADOPTION RELATED STATE ACITIVITY

Alabama

ALA. CODE r. §§ 27-15-70 to 27-15-83 (2016).

Alaska

LASKA

TAT

. § 21.45.300 (1966/2018).

American Samoa

NO CURRENT ACTIVITY

Arizona

RIZ

TAT

§§ 20-1231 to

20-1231.01 (1955/2013).

Arkansas

ODE

. §§ 23-81-201 to 23-81-213

(1959/2019).

California

ODE

§§ 10159.1 to 10167.5

(1943/2017).

ODE

EGS

tit. 10, § 2202 (1996/2016).

Colorado

OLO

TAT

. §§ 10-7-107; §§ 10-7-301

to 10-7-316 (1961/2015).

Connecticut

ONN

TAT

. §§ 38a-438 to 38a-439

(1978/2014).

Delaware

ODE

. tit. 18, § 2929 (1953/2015).

District of Columbia

D.C. C

ODE

§ 31-4705.02 (1934/2019).

Florida

TAT

. § 627.476 (1959/2014).

Georgia

ODE

. § 33-25-4 (1966/2018).

NAIC Model Laws, Regulations, Guidelines and Other Resources—Fall 2019

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

ST-808-4

NAIC MEMBER

MODEL ADOPTION RELATED STATE ACITIVITY

Guam

NO CURRENT ACTIVITY

Hawaii

TAT

§ 431:10D-104

(1988/2014).

Idaho

IDAHO CODE ANN. § 41-1927 (1963/2016).

Illinois

215 I

OMP

TAT

. 5/229.2 (1943/2015).

Indiana

IND. CODE § 27-1-12-7(1948/2018).

Iowa

OWA

ODE

§ 508.37 (1963/2016).

Kansas

TAT

. § 40-428 (1947/2015).

Kentucky

TAT

. § 304.15-310;

§§ 304.15-320 to 304.15-360 (1970/2015).

Louisiana

TAT

. § 22:936 (1960/2013).

Maine

TAT

. tit. 24-A, §§ 2528 to

2534 (1969/2013) (portions of model).

Maryland

ODE

. §§ 16-301 to 16-313

(1951/2015).

Massachusetts

ASS

AWS

ch. 175, §§ 144 to 146A

(1982/2018).

Michigan

ICH

OMP

AWS

§ 500.4060 (1943/2014).

Minnesota

INN

TAT

. A

.§ 61A.24 (1967/2016).

Mississippi

ISS

ODE

. § 83-7-25 (1942/2014).

Missouri

TAT

. § 376.670 (1948/2015).

Montana

MONT. CODE ANN. §§ 33-20-201 to

33-20-213 (1959/2015).

Nebraska

TAT

. §§ 44-407 to 44-407.09;

§§ 44-407.24 to 44-407.26 (1943/2014).

Nevada

TAT

. §§ 688A.290 to 688A.360

(1962/2015).

New Hampshire

N.H. R

TAT

. §§ 409:1 to 409:8

(1943/2013).

NAIC Model Laws, Regulations, Guidelines and Other Resources—Fall 2019

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

NAIC MEMBER

MODEL ADOPTION RELATED STATE ACITIVITY

New Jersey

N.J. R

TAT

. § 17B:25-19 (1971/2014).

ULLETIN

2015-1 (2015).

New Mexico

N.M. S

TAT

. § 59A-20-31 (1985/2014).

New York

N.Y. I

§ 4221 (1984/2002) (previous

version of model).

North Carolina

N.C. G

TAT

. § 58-58-55 (1945/2015).

North Dakota

N.D. C

ENT

ODE

§§ 26.1-33-18 to

26.1-33-28 (1985/2015).

Northern Marianas

NO CURRENT ACTIVITY

Ohio

HIO

ODE

§ 3915.07

(1957/1983); §§ 3915.071 to 3915.072

(1983/2014).

Oklahoma

KLA

TAT

. tit. 36, § 4029 (1957/2014).

Oregon

TAT

. §§ 743.204 to 743.222

(1948/2015).

Pennsylvania

ONS

TAT

510.1

(2016);

40 PA. CONS. STAT. § 7151 (2016).

Puerto Rico

P.R. R

ULE

XLVIII (1984) (previous version of

model).

Rhode Island

R.I. G

AWS

§§ 27-4.3-1 to 27-4.3-11

(1994/2014).

South Carolina

S.C. C

ODE

. §§ 38-63-510 to 38-63-660

(1988/2016).

South Dakota

S.D. C

ODIFIED

AWS

§§ 58-15-31 to 58-15-43

(1966/2015).

Tennessee

ENN

ODE

. § 56-7-401 (1945/2013).

Texas

ODE

. §§ 1105.001 to

1105.153 (2015).

Utah

TAH

ODE

. § 31A-22-408 (1985/2016).

NAIC Model Laws, Regulations, Guidelines and Other Resources—Fall 2019

STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE

ST-808-6

NAIC MEMBER

MODEL ADOPTION RELATED STATE ACITIVITY

Vermont

TAT

. tit. 8, §§ 3760 to 3773

(2015/2017).

Virgin Islands

V.I. C

ODE

. tit. 22, § 984 (1968) (previous

version of model).

Virginia

ODE

. §§ 38.2-3200 to 38.2-3229

(1986/2014).

Washington

ASH

ODE

§§ 48.76.010 to

48.76.900 (1982/2016).

West Virginia

W. V

ODE

§ 33-13-30 (1957/2014).

Wisconsin

TAT

. § 632.43 (1943/2015).

Wyoming

TAT

. §§ 26-16-201 to

26-16-212 (1967/2017).