Article IV. Variable Life Insurance Form
14VAC5-80-100. Variable life insurance form approval; in general.
Article IV
Variable Life Insurance Form
The Commission shall not approve any variable life insurance form filed pursuant to this regulation unless it conforms to the requirements of this Article and all other statutory and regulatory requirements deemed applicable by the Commission. No policy or certificate approved prior to June 15, 1992 shall be delivered or issued for delivery in this Commonwealth until it has been approved by the Commission under the requirements established by this section.
Statutory Authority
§§ 12.1-13 and 38.2-3313 of the Code of Virginia.
Historical Notes
Derived from Regulation 26, Case No. INS920077, Article V, eff. June 15, 1992.
14VAC5-80-110. Filing of variable life insurance policies.
All variable life insurance policies or certificates, and all riders, endorsements, applications and other documents which are to be attached to and made a part of the policy or certificate and which relate to the variable nature of the policy, shall be filed with and approved by the Commission prior to such forms being put in force, issued for delivery, or delivered in this Commonwealth.
1. The procedures and requirements for such filing and approval shall be, to the extent appropriate and not inconsistent with this regulation, the same as those otherwise applicable to other life insurance forms.
2. The Commission may approve variable life insurance policies and related forms with provisions the Commission deems to be not less favorable to the policyholder and the beneficiary than those required by this regulation.
Statutory Authority
§§ 12.1-13 and 38.2-3313 of the Code of Virginia.
Historical Notes
Derived from Regulation 26, Case No. INS920077, Article V, § 1, eff. June 15, 1992.
14VAC5-80-120. Mandatory policy benefit and design requirements.
Variable life insurance policies delivered or issued for delivery in this Commonwealth shall comply with the following minimum requirements.
1. Mortality and expense risks shall be borne by the insurer. The mortality and expense charges shall be subject to the maximums stated in the contract.
2. For scheduled premium policies, a minimum death benefit shall be provided in an amount at least equal to the initial face amount of the policy less any indebtedness so long as premiums are duly paid.
3. The policy shall reflect the investment experience of one or more separate accounts established and maintained by the insurer which shall be set forth in the policy. The insurer must demonstrate that the reflection of the investment experience in variable life insurance policy is actuarially sound.
4. Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base.
5. Any changes in variable death benefits of each variable life insurance policy shall be determined at least annually.
6. The cash value of each variable life insurance policy shall be determined at least monthly. The method of computation of cash values and other nonforfeiture benefits, as described either in the policy or in a statement filed with the insurance supervisory official of the state in which the policy is delivered, or issued for delivery, shall be in accordance with actuarial procedures that recognize the variable nature of the policy. The method of computation must be such that, if the net investment return credited to the policy at all times from the date of issue should be equal to the assumed investment rate with premiums and benefits determined accordingly under the terms of the policy, then the resulting cash values and other nonforfeiture benefits must be at least equal to the minimum values required by § 38.2-3200 through § 38.2-3229 (Standard Nonforfeiture Law) of the Code of Virginia for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under the standard nonforfeiture law of this Commonwealth. If the policy does not contain an assumed investment rate this demonstration shall be based on the maximum interest rate permitted under the standard nonforfeiture law. The method of computation may disregard incidental minimum guarantees as to the dollar amounts payable. Incidental minimum guarantees include, for example, but are not to be limited to, a guarantee that the amount payable at death or maturity shall be at least equal to the amount that otherwise would have been payable if the net investment return credited to the policy at all times from the date of issue had been equal to the assumed investment rate.
7. The computation of values required for each variable life insurance policy may be based upon such reasonable and necessary approximations as are acceptable to the Commission.
Statutory Authority
§§ 12.1-13 and 38.2-3313 of the Code of Virginia.
Historical Notes
Derived from Regulation 26, Case No. INS920077, Article V, § 2, eff. June 15, 1992.
14VAC5-80-130. Mandatory policy provisions.
Each variable life insurance policy filed for approval in this Commonwealth shall in addition to other applicable statutory requirements, contain the following:
1. The first page of each policy shall contain:
a. A prominent statement in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, that the amount or duration of death benefits may be variable or fixed under specified conditions;
b. A prominent statement in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, that cash values may increase or decrease in accordance with the experience of the separate account subject to any specified minimum guarantees;
c. A prominent statement in contrasting color and in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, describing any minimum death benefit required pursuant to subdivision 2 of 14VAC5-80-120;
d. A statement describing the method, or a reference to the policy provision which describes the method, for determining the amount of insurance payable at death;
e. When appropriate a prominent statement in boldface type at least two points larger than the type used for policy provisions, printed in all capital letters, that the policy loan value is less than 100% of the policy's cash value surrender value;
2.a. For scheduled premium policies, a provision for a grace period of not less than 31 days from the premium due date which shall provide that where the premium is paid within the grace period, policy values will be the same, except for the deduction of any overdue premium, as if the premium were paid on or before the due date.
b. For flexible premium policies, a provision for a grace period beginning on the policy processing day when the total charges authorized by the policy that are necessary to keep the policy in force until the next policy processing day exceed the amounts available under the policy to pay such charges in accordance with the terms of the policy. Such grace period shall end on a date not less than 61 days after the mailing date of the report to policyholders required by subdivision 3 of Article IX (14VAC5-80-320).
The death benefit payable during the grace period will equal the death benefit less any outstanding indebtedness and less any overdue charges at the time of the last valuation of the policy preceding the beginning of the grace period.
3.a. For scheduled premium policies, a provision that the policy will be reinstated at any time within three years from the date of default upon the written application of the insured, and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:
(1) All overdue premiums with interest at a rate not exceeding 6.0% per year compounded annually and any indebtedness in effect at the end of the grace period following the date of default with interest at a rate as provided in § 38.2-3308 of the Code of Virginia; or
(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding 6.0% per annum compounded annually.
b. For flexible premium policies a provision that the policy will be reinstated at any time within three years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, unless the cash surrender value has been paid or the period of extended insurance has expired, upon the payment of any outstanding indebtedness arising subsequent to the end of the grace period following the date of default together with accrued interest thereon to the date of reinstatement and payment of an amount not exceeding the greater of:
(1) A charge not to exceed three months cost of insurance; or
(2) 110% of the increase in cash value resulting from reinstatement plus all overdue premiums for incidental insurance benefits with interest at a rate not exceeding 6.0% per annum compounded annually.
4. A full description of the benefit base and of the method of calculation and application of any factors used to adjust variable benefits under the policy;
5. A provision designating the separate account to be used and stating that:
a. The assets of such separate account shall be available to cover the liabilities of the general account of the insurer only to the extent that the assets of the separate account exceed the liabilities of the separate account arising under the variable life insurance policies supported by the separate account;
b. The assets of such separate account shall be valued at least as often as any policy benefits vary but at least monthly.
6. A designation of the officers who are empowered to make an agreement or representation on behalf of the insurer;
7. A provision setting forth conditions or requirements as to the designation, or change of designation, of a beneficiary and a provision for disbursement of benefits in the absence of a beneficiary designation;
8. A statement of any conditions or requirements concerning the assignment of the policy;
9. A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;
10. A provision stating that the investment policy of the separate account shall not be changed without the approval of the insurance supervisory official of the state of domicile of the insurer, and that the approval process is on file with the Commission;
11. A provision that payments of variable death benefits in excess of any minimum death benefits, cash values, policy loans, or partial withdrawals (except when used to pay premiums) or partial surrenders may be deferred;
a. For up to six months from the date of request, if such payments are based on policy values which do not depend on the investment performance of the separate account, or
b. Otherwise, for any period during which the New York Stock Exchange is closed for trading (except for normal holiday closing) or when the Securities and Exchange Commission has determined that a state of emergency exists which may make such payment impractical;
12. If settlement options are provided, at least one such option shall be provided on a fixed basis only;
13. A description of the basis for computing the cash value and the surrender value under the policy shall be included;
14. Premiums or charges for incidental insurance benefits shall be stated separately; and
15. The insurer may establish a reasonable minimum cash value below which any nonforfeiture insurance options will not be available. Upon termination of any policy if there is any cash value, the cash value shall be returned to the owner of the policy.
Statutory Authority
§§ 12.1-13 and 38.2-3313 of the Code of Virginia.
Historical Notes
Derived from Regulation 26, Case No. INS920077, Article V, § 3, eff. June 15, 1992.
14VAC5-80-140. Policy loan provisions.
Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this Commonwealth shall contain, in addition to other applicable statutory requirements, provisions which are not less favorable to the policyholder than the following:
A provision for policy loans after the policy has been in force for two full years which provides the following:
1. For scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within 31 days after the date of mailing of such notice.
2. The policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyowner may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.
3. The policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum shall not apply to any automatic premium loan provision.
4. The policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof.
5. Any amount paid to the policyholders upon the exercise of any policy loan provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amount for policy loans from the general account.
6. At least 90% of the policy's cash surrender value may be borrowed.
Statutory Authority
§§ 12.1-13 and 38.2-3313 of the Code of Virginia.
Historical Notes
Derived from Regulation 26, Case No. INS920077, Article V, § 4, eff. June 15, 1992.
14VAC5-80-150. Other policy provisions.
The following provisions may in substance be included in a variable life insurance policy or related form delivered or issued for delivery in this Commonwealth:
1. For any increase in death benefits which results from an application of the owner subsequent to the policy issue date, the policy may provide an exclusion for suicide within two years of such increase as to the increased amount of death benefits. Any refund due under a suicide exclusion may be adjusted to reflect the investment activity of the variable account;
2. Incidental insurance benefits may be offered on a fixed or variable basis;
3. A provision allowing the policyholder to elect in writing in the application for the policy or thereafter an automatic premium loan on a basis not less favorable than that required of policy loans under 14VAC5-80-140, except that a restriction that no more than two consecutive premiums can be paid under this provision may be imposed;
4. A provision allowing the policyholder to make partial withdrawals;
5. Any other policy provision approved by the Commission.
Statutory Authority
§§ 12.1-13 and 38.2-3313 of the Code of Virginia.
Historical Notes
Derived from Regulation 26, Case No. INS920077, Article V, § 5, eff. June 15, 1992.