A.R.S. tit. 20 ch. 6 — Arizona Revised Statutes Title 20 Chapter 6 — Particular Types Of Insurance

20-1201. Scope of article This article applies to contracts of life insurance and annuities, other than reinsurance, group life insurance, group annuities and industrial life insurance. Section 20-1217 (contestability as to excluded or restricted coverage), section 20-1226 (limitation of liability), section 20-1227 (incontestability after reinstatement), section 20-1230 (dual pay policies) and sections 20-1231 and 20-1231.01 (standard nonforfeiture law) shall apply to industrial life insurance also. 20-1202. Standard provisions required in life insurance policies A. No policy of life insurance other than industrial, group and pure endowments with or without return of premiums or of premiums and interest, shall be delivered or issued for delivery in this state unless it contains in substance all of the provisions required by sections 20-1203 to 20-1216, inclusive. This section shall not apply to annuity contracts nor to any provision of a life insurance policy relating to disability benefits or to additional benefits in the event of death by accident or accidental means. B. Any provisions or portions thereof not applicable to single premium or term policies shall to that extent not be incorporated therein. 20-1203. Grace period There shall be a provision that a grace period of thirty days, or, at the option of the insurer, of one month of not less than thirty days, shall be allowed within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force. If a claim arises under the policy during the period of grace before the overdue premium is paid, the amount of the premium may be deducted from the policy proceeds. 20-1204. Incontestability There shall be a provision that the policy, exclusive of provisions relating to disability benefits or to additional benefits in the event of death by accident or accidental means, shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two years from its date of issue. 20-1205. Application and policy as entire contract; statements in application as representations; information A. There shall be a provision that the policy, or the policy and the application therefor if a copy of the application is endorsed upon or attached to the policy when issued, shall constitute the entire contract between the parties, and that all statements contained in the application shall, in the absence of fraud, be deemed representations and not warranties. B. On written request of an applicant or annuity holder, an insurer shall provide within a reasonable time reasonable factual information regarding the benefits and provisions of his annuity contract. 20-1206. Misstatement of age There shall be a provision that if the age of the insured or of any other person whose age is considered in determining the premium has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages. 20-1207. Dividends There shall be a provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy provided the policy is in force and all premiums to that date are paid. Except as provided in this section, any dividend so apportioned shall, at the option of the party entitled to elect such option, be either payable in cash or applied to any one of such other dividend options as may be provided by the policy. If any such other dividend options are provided, the policy shall further state which option shall be automatically effective if the party has not elected some other option. If the policy specifies a period within which the other dividend option may be elected, such period shall be not less than thirty days following the date on which the dividend is due and payable. The annually apportioned dividend shall be deemed to be payable in cash even though the policy provides that payment of the dividend is to be deferred for a specified period, but such period shall not exceed six years from the date of apportionment and interest shall be added to the dividend at a specified rate. If a participating policy provides that the benefit under any paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus apportioned while the insurance is in force under the nonforfeiture provision shall be applied in the manner set forth in the policy. 20-1208. Policy loan on old policies A. In the case of policies issued prior to the operative date of section 20-1231, there shall be a provision that after three full years premiums have been paid, the insurer at any time while the policy is in force will advance on proper assignment or pledge of the policy and on the sole security thereof at a specified rate of interest not to exceed six per cent per annum, an amount equal to, or at the option of the owner of the policy less than, the reserve at the end of the current policy year on the policy and on any dividend addition thereto, computed according to any mortality table, rate of interest and the method of valuation permitted by the provisions of this title, the policy specifying the mortality table and rate of interest adopted for computing such reserve, less an amount not more than two and one-half per cent of the amount insured by the policy and of any dividend additions thereto, and that the insurer shall deduct from such loan value any existing indebtedness on the policy and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year. An insurer may, in lieu of the provisions permitted by this section for the deduction from a loan on the policy of an amount not more than two and one-half per cent of the amount insured by the policy and of any dividend additions thereto, insert in the policy a provision that one fifth of the entire reserve may be deducted in case of a loan under the policy, or may provide therein that the deduction may be the two and one-half per cent or the one fifth of the entire reserve at the option of the insurer. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for six months after application therefor is made. The policy, at the insurer's option, may provide for an automatic premium loan, subject to an election of the party entitled to elect. B. The provision provided for in subsection A of this section shall not be required in term insurance, nor shall it apply to temporary insurance or pure endowment insurance, issued or granted in exchange for lapsed or surrendered policies. C. In ascertaining the indebtedness due from policy loans, the interest, if not paid when due, shall be added to the principal of the loans and shall bear interest at the rate specified in the note or loan agreement. 20-1209. Policy loan on new policies A. In case of policies issued on and after January 1, 1979, there shall be a provision that after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will advance, on proper assignment or pledge of the policy and on the sole security of such policy, at a specified rate of interest, an amount equal to or, at the option of the party entitled thereto, less than the loan value of the policy. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, provided that the insurer may deduct, either from the loan value or from the proceeds of the loan, any existing indebtedness not already deducted in determining the cash surrender value including any interest then accrued but not due, any unpaid balance of the premium for the current policy year and interest on the loan to the end of the current policy year. The policy may also provide that if interest on any indebtedness is not paid when due it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value the policy shall terminate and become void. The policy shall reserve to the insurer the right to defer the granting of a loan, other than for the payment of any premium to the insurer, for six months after application. The policy, at the insurer's option, may provide for an automatic premium loan, subject to an election of the party entitled to elect. B. This section shall not apply to term policies nor to term insurance benefits provided by rider or supplemented policy provision. 20-1209.01. Maximum rate of interest on policy loans; definitions A. Policies issued on or after the effective date of this section shall provide for policy loan interest rates at either of the following levels: 1. A maximum interest rate of not more than eight per cent a year. 2. An adjustable maximum interest rate established by the life insurer as provided by this section. B. The rate of interest charged on a policy loan made by a life insurer under subsection A, paragraph 2 of this section shall not exceed the higher of the following: 1. The published monthly average for the calendar month ending two months before the date on which the rate is determined. 2. The rate used to compute the cash surrender values under the policy during the applicable period plus one per cent a year. C. If the maximum rate of interest on a policy loan is determined under subsection A, paragraph 2 of this section, the policy shall contain a provision prescribing the frequency at which the rate is to be recalculated for that policy. D. The life insurer shall determine the maximum rate for each policy containing a provision permitting an adjustable policy loan interest rate at regular intervals at least once every twelve months but not more frequently than once in any three month period. At the intervals specified in the policy: 1. The life insurer may increase the policy loan interest rate being charged if the increase as determined under subsection B of this section would increase that rate by one-half per cent or more a year. 2. The life insurer shall reduce the policy loan interest rate being charged if the reduction as determined under subsection B of this section would decrease that rate by one-half per cent or more a year. E. The life insurer shall: 1. Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan. 2. Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan. Notice need not be given to the policyholder if a further premium loan is added, except as provided in paragraph 3 of this subsection. 3. Send to policyholders with loans reasonable advance notice of any increase in the rate. 4. Include in the notices required by this subsection the substance of the provisions of either subsection A, paragraph 1, or subsection A, paragraph 2 and subsection C of this section, whichever is applicable. F. The life insurer shall determine the loan value of the policy according to section 20-1209, but no policy may terminate in a policy year as the sole result of a change in the interest rate during that policy year, and the life insurer shall maintain coverage during that policy year until the time at which it would otherwise have terminated if there had been no change during that policy year. G. The substance of the provisions of either subsection A, paragraph 1, or subsection A, paragraph 2 and subsection C of this section shall be set forth in the policies to which they apply. H. The rate of interest on policy loans permitted under this section includes the interest rate charged on reinstatement of policy loans for the period during and after any lapse of a policy. I. In this section, unless the context otherwise requires: 1. "Policy" includes certificates issued by a fraternal benefit society and annuity contracts which provide for policy loans. 2. "Policyholder" includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer. 3. "Policy loan" includes any premium loan made under a policy to pay one or more premiums that were not paid to the life insurer as they fell due. 4. "Published monthly average" means either: (a) The Moody's corporate bond yield average, monthly average corporates, as published by Moody's investors service, incorporated or any successor to the corporation. (b) If the Moody's corporate bond yield average, monthly average corporates, is no longer published, a substantially similar average, established by rule of the director. J. No other provisions of law applies to policy loan interest rates unless made specifically applicable to such a rate. 20-1210. Nonforfeiture options in old policies A. There shall be a provision specifying the option to which the policyholder is entitled in the event of default in a premium payment after three full annual premiums have been paid. This provision shall not be required in term insurance of twenty years or less, for which uniform premiums are payable during the entire term of the policy, nor to any term policy of decreasing amount. A provision may also be inserted in the policy that in the event of default in a premium payment before such options become available the reserve on any dividend addition then in force may at the option of the insurer be paid in cash or applied as a net premium to the purchase of paid-up term insurance for any amount not in excess of the face of the original policy. B. This section shall not apply to policies issued on or after the operative date of section 20-1231. 20-1212. Table of installments In case the policy provides that the proceeds may be payable in installments which are determinable at issue of the policy, there shall be a table showing the amounts of the guaranteed installments. 20-1213. Reinstatement There shall be a provision that unless the policy has been surrendered for its cash surrender value or unless the paid-up term insurance, if any, has expired, the policy will be reinstated at any time within three years from the date of premium default upon written application therefor, the production of evidence of insurability satisfactory to the insurer, the payment of all premiums in arrears, and the payment or reinstatement of any other indebtedness to the insurer upon the policy, all with interest at a rate not exceeding six per cent per annum compounded annually. 20-1214. Payment of premiums There shall be a provision that all premiums after the first shall be payable in advance. 20-1215. Payment of claims There shall be a provision that when a policy becomes a claim by the death of the insured settlement shall be made upon receipt of due proof of death and, at the insurer's option, surrender of the policy, proof of the interest of the claimant, or both. If an insurer specifies a particular period prior to the expiration of which settlement shall be made, the period shall not exceed two months from the receipt of such proofs. 20-1216. Policy title There shall be a title on the face and on the back of the policy, briefly describing the policy. 20-1217. Excluded or restricted coverage A clause in any policy of life insurance providing that the policy shall be incontestable after a specified period shall preclude only a contest of the validity of the policy, and shall not preclude the assertion at any time of defenses based upon provisions in the policy which exclude or restrict coverage, whether or not such restrictions or exclusions are excepted in the clause. 20-1218. Standard provisions required in annuity and pure endowment contracts A. No annuity or pure endowment contract, other than reversionary annuities, survivorship annuities or group annuities, and except as stated in this section, shall be delivered or issued for delivery in this state unless it contains in substance each of the provisions specified in sections 20-1219 to 20-1224, inclusive. Any such provisions not applicable to single premium annuities or single premium pure endowment contracts shall not, to that extent, be incorporated therein. B. This section shall not apply to contracts for deferred annuities included in, or upon the lives of beneficiaries under, life insurance policies. 20-1219. Grace period in annuities In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that there shall be a period of grace of one month, but not less than thirty days, within which any stipulated payment to the insurer falling due after the first may be made, subject at the option of the insurer to an interest charge thereon at a rate to be specified in the contract but not exceeding six per cent per annum for the number of days of grace elapsing before payment, during which period of grace the contract shall continue in full force, but in case a claim arises under the contract on account of death prior to expiration of the period of grace before the overdue payment to the insurer or the deferred payments of the current contract year, if any, are made, the amount of the payments, with interest on any overdue payments, may be deducted from any amount payable under the contract in settlement. 20-1220. Incontestability in annuities If any statements, other than those relating to age, sex and identity are required as a condition to issuing an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, and subject to section 20-1222, there shall be a provision that the contract shall be incontestable after it has been in force during the lifetime of the person or of each of the persons as to whom such statements are required, for a period of two years from its date of issue, except for nonpayment of stipulated payments to the insurer. At the option of the insurer the contract may also except any provisions relative to benefits in the event of disability and any provisions which grant insurance specifically against death by accident or accidental means. 20-1221. Application and contract as entire contract in annuities In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that the contract shall constitute the entire contract between the parties or, if a copy of the application is endorsed upon or attached to the contract when issued, a provision that the contract and the application therefor shall constitute the entire contract between the parties. 20-1222. Misstatement of age in annuities In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that if the age of the person or persons upon whose life or lives the contract is made, or of any of them, has been misstated, the amount payable or benefits accruing under the contract shall be such as the stipulated payment or payments to the insurer would have purchased according to the correct age, and that if the insurer makes or has made any overpayment or overpayments on account of such misstatement, the amount thereof, with interest at the rate to be specified in the contract but not exceeding six per cent per annum, may be charged against the current or next succeeding payment or payments to be made by the insurer under the contract. 20-1223. Dividends on annuities If an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, is participating, there shall be a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the contract. 20-1224. Reinstatement of annuities In an annuity or pure endowment contract, other than a reversionary, survivorship or group annuity, there shall be a provision that the contract may be reinstated at any time within one year from the default in making stipulated payments to the insurer, unless the cash surrender value has been paid, but all overdue stipulated payments and any indebtedness to the insurer on the contract shall be paid or reinstated with interest thereon at a rate to be specified in the contract but not exceeding six per cent per annum payable annually, and in cases where applicable the insurer may also include a requirement of evidence of insurability satisfactory to the insurer. 20-1225. Standard provisions required in reversionary annuities A. Except as stated herein, no contract for a reversionary annuity shall be delivered or issued for delivery in this state unless it contains in substance each of the following provisions: 1. The reversionary annuity contract shall contain the provisions specified in sections 20-1219, 20-1220, 20-1221, 20-1222 and 20-1223, except that under section 20-1219 the insurer may at its option provide for an equitable reduction of the amount of the annuity payments in settlement of an overdue or deferred payment in lieu of providing for deduction of such payments from an amount payable upon settlement under the contract. 2. In reversionary annuity contracts there shall be a provision that the contract may be reinstated at any time within three years from the date of default in making stipulated payments to the insurer, upon production of evidence of insurability satisfactory to the insurer, and upon condition that all overdue payments and any indebtedness to the insurer on account of the contract be paid, or, within the limits permitted by the then cash values of the contract, reinstated, with interest as to both payments and indebtedness at a rate to be specified in the contract but not exceeding six per cent per annum compounded annually. B. This section shall not apply to group annuities or to annuities included in life insurance policies, and any such provisions not applicable to single premium annuities shall not to that extent be incorporated therein. 20-1226. Limitation of liability A. No life insurance policy shall be delivered or issued for delivery in this state if it contains a provision that excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status, except that a policy may contain provisions excluding or restricting coverage as specified therein in the event of death under any one or more of the following circumstances: 1. Death as a result, directly or indirectly, of war, declared or undeclared, or of action by military forces, or of any act or hazard of such war or action, or of service in the military, naval or air forces or in civilian forces auxiliary thereto, or from any cause while a member of such military, naval or air forces of any country at war, declared or undeclared, or of any country engaged in such military action. 2. Death as a result of aviation. 3. Death as a result of a specified hazardous occupation or occupations. 4. Death while the insured is outside the continental United States and Canada. B. A life insurance policy that is delivered or issued for delivery in this state may include an exclusion for death resulting from suicide that occurs within two years after the issue or reinstatement of the policy. If the owner applies for an increase in death benefits after the policy issue date, the policy may provide an exclusion for suicide that occurs within one year after any increase in death benefits only to the extent of the increased death benefits. C. A policy that contains any exclusion or restriction pursuant to this section shall also provide that in the event of death under the circumstances to which the exclusion or restriction is applicable, the insurer will pay an amount not less than a reserve determined according to the commissioners reserve valuation method upon the basis of the mortality table and interest rate specified in the policy for the calculation of nonforfeiture benefits, or if the policy provides for no such benefits, computed according to a mortality table and interest rate determined by the insurer and specified in the policy, with adjustment for indebtedness or dividend credit. D. This section shall not apply to group life insurance, disability insurance, reinsurance or annuities, or to any provision in a life insurance policy relating to disability benefits or to additional benefits in the event of death by accident or accidental means. 20-1227. Incontestability after reinstatement The reinstatement of any policy of life insurance or annuity contract delivered or issued for delivery in this state after January 1, 1955 may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contestability after original issuance. 20-1228. Policy settlements Any life insurer may hold under agreement the proceeds of any policy issued by it, upon such terms and restrictions as to revocation by the policyholder and control by beneficiaries, and with such exemptions from the claims of creditors of beneficiaries other than the policyholder as set forth in the policy or as agreed to in writing by the insurer and the policyholder. Upon maturity of a policy, in the event the policyholder has made no such agreement, the insurer may hold the proceeds of the policy under an agreement with the beneficiaries. The insurer shall not be required to segregate the funds so held but may hold them as part of its general assets. 20-1229. Authorized deductions from insurance proceeds In determining the amount due under any life insurance policy issued, deduction may be made of: 1. Any unpaid premiums or installments thereof for the current policy year due under the terms of the policy. 2. The amount of principal and accrued interest of any policy loan or other indebtedness against the policy then remaining unpaid. 20-1230. Prohibition of dual or multiple pay policies No life insurance policy shall be issued or delivered in this state if it provides that on the death of anyone not specifically named therein, the owner or beneficiary of the policy shall receive the payment or granting of anything of value. 20-1231. Standard nonforfeiture law for life insurance A. This section may be cited as the standard nonforfeiture law for life insurance. B. Nonforfeiture provisions--Life. In the case of policies issued on or after the operative date of this section as defined in subsection J of this section, no policy of life insurance, except as set forth in subsection I of this section, shall be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions which in the opinion of the director are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this section and are essentially in compliance with subsection H of this section: 1. That in the event of default in any premium payment, the insurer will grant, upon proper request not later than sixty days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of such due date, of such amount as is specified by this section. Instead of the stipulated paid-up nonforfeiture benefit, the insurer may substitute, upon proper request not later than sixty 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. 2. That upon surrender of the policy within sixty days after the due date of any premium payment in default after premiums have been paid for at least three full years in the case of ordinary insurance, and five full years in the case of industrial insurance, the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender value of such amount as is specified by this section. 3. That a specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make such election elects another available option not later than sixty days after the due date of the premium in default. 4. That if the policy has become paid up by completion of all premiums 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 insurer will pay, upon surrender of the policy within thirty days after any policy anniversary, a cash surrender value of such amount as is specified by this section. 5. 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 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 insurer on the policy. 6. A statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or pursuant to the insurance law of this state, 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 insurer on the policy, if a detailed statement of the method of computation of the values and benefits shown in the policy is not stated therein, a statement that such method of computation has been filed with the insurance supervisory official of the state in which the policy is delivered, and a statement of the method to be used in calculating the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which such values and benefits are consecutively shown in the policy. C. Any of the provisions or portions of the provisions set forth in subsection B, paragraphs 1 through 6 of this section which are not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy. The insurer 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. Cash surrender value--Life. 1. Any cash surrender value available under the policy in the event of default in the premium payment due on any policy anniversary, whether or not required by subsection B of this section, shall be an amount not less than the excess, if any, of the present value on such anniversary of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions if there had been no default, over the sum of the then present value of the adjusted premiums as defined in subsection F of this section and in section 20-1231.01, corresponding to premiums which would have fallen due on and after such anniversary, and the amount of any indebtedness to the insurer on account of or secured by the policy. 2. For any policy issued on or after the operative date as provided in section 20-1231.01 which provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider or supplemental policy provision, the cash surrender value referred to in paragraph 1 of this subsection is in an amount not less than the sum of the cash surrender value as defined in such paragraph for an otherwise similar policy issued at the same age without such rider or supplemental policy provision and the cash surrender value as defined in such paragraph for a policy which provides only the benefits otherwise provided by such rider or supplemental policy provision. 3. For any family policy issued on or after the operative date as provided in section 20-1231.01 which defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse's age seventy-one, the cash surrender value referred to in paragraph 1 of this subsection is in an amount not less than the sum of the cash surrender value as defined in that paragraph 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 that paragraph for a policy which provides only the benefits otherwise provided by term insurance on the life of the spouse. 4. Any cash surrender value available within thirty 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 benefits, whether or not required by subsection B of this section, shall be an amount not less than the present value, on such anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the insurer on account of or secured by the policy. E. Paid-up nonforfeiture benefits--Life. Any paid-up nonforfeiture benefit available under the policy in the event of default in the premium payment due on any policy anniversary shall be such that its present value as of such anniversary shall be at least equal to the cash surrender value then provided for by the policy, or, if none is provided for, that cash surrender value which would have been required by this section in the absence of the conditions that premiums shall have been paid for at least a specified period. F. The adjusted premiums--Life. 1. Paragraphs 1 through 4 and paragraph 5, subdivision (a) of this subsection do not apply to policies issued on or after the operative date as provided in section 20-1231.01. Except as provided in paragraph 3 of this subsection, the adjusted premiums for any policy shall be calculated on an annual basis and shall be such uniform percentage of the respective premiums specified in the policy for each policy year, excluding extra premiums on a substandard policy, 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 per cent of the amount of the insurance if the insurance is uniform in amount, or of the equivalent uniform amount, as defined by this section, if the amount of insurance varies with the duration of the policy. (c) Forty per cent of the adjusted premium for the first policy year. (d) Twenty-five per cent 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 (c) and (d) of paragraph 1 of this subsection, no adjusted premiums shall be deemed to exceed four per cent of the amount of insurance or uniform amount equivalent thereto. When the plan or term of a policy has been changed, either by request of the insured or automatically in accordance with the provisions of the policy, the date of inception of the changed policy for the purposes of determining a nonforfeiture benefit or cash surrender value shall be the date as of which the age of the insured is determined for the purposes of the changed policy. 3. The adjusted premiums for any policy providing term insurance benefits by rider or supplemental policy provisions shall be equal to the sum of: (a) The adjusted premiums for an otherwise similar policy issued at the same age without such term insurance benefits. (b) The adjusted premiums for such term insurance benefits during the period for which premiums for such term insurance benefits are payable. Such subdivisions (a) and (b) shall be calculated separately and as specified in paragraphs 1 and 2 of this subsection except that, for the purposes of subdivisions (b), (c) and (d) of paragraph 1 of this subsection, the amount of insurance or equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in this subdivision 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 (a) of this paragraph. 4. In the case of a policy providing an amount of insurance varying with the duration of the policy, the equivalent uniform amount thereof for the purpose of paragraphs 1, 2 and 3 of this subsection shall be deemed to be the uniform amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the date of issue as the benefits under the policy, but in the case of a policy for a varying amount of insurance issued on the life of a child under age ten, the equivalent uniform amount may be computed as though the amount of insurance provided by the policy prior to the attainment of age ten were the amount provided by the policy at age ten. 5. Tables for calculating adjusted premiums shall be as follows: (a) Except as otherwise provided in subdivisions (b) and (d) of this paragraph, all adjusted premiums and present values referred to in this section shall for all policies of ordinary insurance be calculated on the basis of the commissioners 1941 standard ordinary mortality table provided that, for any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not in excess of three years younger than the actual age of the insured. 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 per cent per annum, specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits, but 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 thirty per cent of the rates of mortality according to such applicable table. For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the director. (b) This subdivision does not apply to ordinary policies issued on or after the operative date as provided in section 20-1231.01. In the case of ordinary policies issued on or after the operative date defined in subdivision (c) of this paragraph, all adjusted premiums and present values referred to in this section shall be calculated on the basis of the commissioners 1958 standard ordinary mortality table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits, provided that such rate of interest shall not exceed three and one-half per cent per annum except that a rate of interest not exceeding four per cent per annum may be used for policies issued on or after July 1, 1974 and prior to January 1, 1979, and a rate of interest not exceeding five and one-half per cent per annum may be used for policies issued on or after January 1, 1979, except that for any single premium whole life or endowment insurance policy a rate of interest not exceeding six and one-half per cent per annum may be used, and provided that: (i) For any category of ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not in excess of six years younger than the actual age of the insured. (ii) 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 in excess of those shown in the commissioners 1958 extended term insurance table. (iii) For insurance issued on a substandard basis, the calculation of any such adjusted premiums and present values may be based on such other table of mortality as may be specified by the insurer and approved by the director. (c) Any insurer may file with the director a written notice of its election to comply with the provisions of subdivision (b) of this paragraph, either as to designated ordinary policies or as to all ordinary policies issued by it, after a specified date before January 1, 1966. After the filing of such notice, then upon such specified date, which shall be the operative date of such subdivision (b) as to such policies for such insurer, such subdivision (b) shall become operative with respect to such policies thereafter issued by such insurer. If an insurer makes no such election, or so elects to have such subdivision (b) apply as to certain of its ordinary policies only, the operative date thereof as to all of the ordinary policies issued by such insurer, other than those policies as to which the insurer has elected an earlier operative date, shall be January 1, 1966. (d) This subdivision does not apply to industrial policies issued on or after the operative date provided in section 20-1231.01. In the case of industrial policies issued on or after the operative date of this subdivision as defined herein, all adjusted premiums and present values referred to in this subdivision 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 per cent per annum except that a rate of interest not exceeding four per cent per annum may be used for policies issued on or after July 1, 1974 and prior to January 1, 1979, and a rate of interest not exceeding five and one-half per cent per annum may be used for policies issued on or after January 1, 1979, except that for any single premium whole life or endowment insurance policy a rate of interest not exceeding six and one-half per cent per annum may be used. But, 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 and, 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 insurer and approved by the director. After the effective date of this subdivision, an insurer may file with the director a written notice of its election to comply with the provisions of this subdivision, either as to designated industrial policies or as to all industrial policies issued by it, after a specified date before January 1, 1968. After the filing of such notice, then upon such specified date, which shall be the operative date of this subdivision for such insurer, this subdivision shall become operative with respect to the industrial policies thereafter issued by such insurer. If an insurer makes no such election, the operative date of this subdivision for such insurer shall be January 1, 1968. (e) For any plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or for any plan of life insurance which is of such a nature that minimum values cannot be determined by the methods described in subsection B, C, D or E of this section, paragraph 1 of this subsection, subdivision (b), (c) or (d) of this paragraph or section 20-1231.01, then: (i) The director must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by subsection B, C, D or E of this section, paragraph 1 of this subsection, subdivision (b), (c) or (d) of this paragraph or section 20-1231.01. (ii) The director must be satisfied that the benefits and the pattern of premiums of the plan are not such as to mislead prospective policyholders or insureds. (iii) The cash surrender values and paid-up nonforfeiture benefits provided by the 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 rules adopted by the director. G. Calculation of values--Life. 1. Any cash surrender value and any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary shall be calculated with allowance for the lapse of time and the payment of fractional premiums beyond the last preceding policy anniversary. All values referred to in subsections D, E and F of this section and section 20-1231.01 may be calculated upon the assumption that any death benefit is payable at the end of the policy year of death. The net value of any paid-up additions, other than paid-up term additions, shall be not less than the amounts used to provide such additions. 2. Notwithstanding such provisions of subsection D of this section, additional benefits payable and premiums for all such additional benefits shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section, and no such additional benefits shall be required to be included in any paid-up nonforfeiture benefits: (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 section would not apply. (e) As term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if such term insurance expires before the child's age is twenty-six, is uniform in amount after the child's age is one, and has not become paid-up by reason of the death of a parent of the child. (f) As other policy benefits additional to life insurance and endowment benefits. H. This subsection, in addition to all other applicable subsections of this section, applies to all policies issued on or after January 1, 1986: 1. 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 per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years, from the sum of: (a) The greater of zero and the basic cash value hereinafter specified. (b) The present value of any existing paid-up additions less the amount of any indebtedness to the insurer under the policy. 2. 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 insurer, if there had been no default, less the then present value of the nonforfeiture factors, corresponding to premiums which would have fallen due on and after such anniversary, except that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described in subsection D or F of this section, whichever is applicable, shall be the same as are the effects specified in subsection D or F of this section, whichever is applicable, on the cash surrender values defined in that subsection. 3. The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in subsection F of this section or section 20-1231.01, whichever is applicable. Except as is required by the next succeeding sentence of this paragraph, such percentage: (a) Must be the same percentage for each policy year between the second policy anniversary and the latter of: (i) The fifth policy anniversary. (ii) The first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness, of at least two-tenths of one per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years. (b) Must be such that no percentage after the later of the two policy anniversaries specified in subdivision (a) may apply to fewer than five consecutive policy years. 4. No basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, as defined in subsection F of this section or section 20-1231.01, whichever is applicable, were substituted for the nonforfeiture factors in the calculation of the basic cash value. 5. All adjusted premiums and present values referred to in this subsection shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy's compliance with the other subsections of this section. The cash surrender values referred to in this subsection shall include any endowment benefits provided for by the policy. 6. Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in manners consistent with the manners specified for determining the analogous minimum amounts in subsections B, C, D, E and G of this section and section 20-1231.01. 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 subsection G, paragraph 2 of this section shall conform with the principles of this subsection. I. Exceptions. This section and section 20-1231.01 do not apply to any of the following: 1. Reinsurance. 2. Group insurance. 3. Pure endowment. 4. Annuity or reversionary annuity contract. 5. A term policy of uniform amount which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of twenty years or less expiring before age seventy-one, 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 subsection F of this section and section 20-1231.01, is less than the adjusted premiums so calculated on a term policy of uniform amount, or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance and for a term of twenty years or less expiring before age seventy-one, for which uniform premiums are payable during the entire term of the policy. 7. Any policy which is delivered outside this state through an insurance producer or other representative of the insurer issuing the policy. 8. A policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in subsections D, E and F of this section and section 20-1231.01, exceeds two and one-half per cent of the amount of insurance at the beginning of the same policy year. For the purposes of determining the applicability of this section, the age at expiry for a joint term life insurance policy is the age at expiry of the oldest life. J. Operative date. Except as is otherwise provided in subsection F of this section, after January 1, 1955, any insurer may file with the director a written notice of its election to comply with the provisions of this section after a specified date before July 1, 1956. After the filing of such notice, then upon such specified date, which shall be the operative date for such insurer, this section shall become operative with respect to the policies thereafter issued by the insurer. If an insurer makes no such election, the operative date of this section for the insurer shall be July 1, 1956. 20-1231.01. Standard nonforfeiture law for life insurance; table for calculating adjusted premiums; definitions A. Except as provided in paragraph 7 of this section, on a policy issued on or after the operative date as provided in this section: 1. The adjusted premiums for any policy shall be calculated on an annual basis and shall be such a 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 per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years. (c) One hundred twenty-five per cent of the nonforfeiture net level premium. In applying the percentage specified in subdivision (c) of this paragraph no nonforfeiture net level premium shall be deemed to exceed four per cent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first ten policy years. The date of issue of a policy for the purpose of this section is the date as of which the rated age of the insured is determined. 2. The nonforfeiture net level premium is 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. 3. 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 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 such a 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. 4. Except as otherwise provided in paragraph 7 of this section, the recalculated future adjusted premiums for any such policy are 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 the sum of the then present value of the then future guaranteed benefits provided for by the policy and the additional expense allowance, if any, over the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy. 5. The additional expense allowance, at the time of the change to the newly defined benefits or premiums, is the sum of: (a) One per cent of the excess, if positive, of the average amount of insurance at the beginning of each of the first ten policy years subsequent to the change over the average amount of insurance prior to the change at the beginning of each of the first ten policy years subsequent to the time of the most recent previous change or, if there has been no previous change, the date of issue of the policy. (b) One hundred twenty-five per cent of the increase, if positive, in the nonforfeiture net level premium. 6. The recalculated nonforfeiture net level premium is equal to the result obtained by dividing (a) by (b) where: (a) (a) equals the sum of: (i) The nonforfeiture net level premium applicable prior to the change times the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred. (ii) The present value of the increase in future guaranteed benefits provided for by the policy. (b) (b) equals the present value of an annuity of one per annum payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due. 7. Notwithstanding any other provisions of this section, 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 amounts of insurance, adjusted premiums and present values for the su