Chap. 69.—An ACT to amend and re-enact Sections 4251-c, 4257, as amended, and
4258-1 of the Code of Virginia, and to amend the Code by adding thereto three
new sections numbered 4251-c 1, 4251-c 2 and 4251-c 3, the amended and the new
sections relating to life insurance policies, establishing certain minimum non-
forfeiture benefits therefor and establishing minimum standards of reserves to

be maintained thereon. [S 72]
Approved February 28, 1944
Be it enacted by the General Assembly of Virginia:

1. That sections forty-two hundred fifty-one-c, forty-two hundred
fifty-seven, as amended, and forty-two hundred fifty-eight-1 of the Code of
\irginia, be amended and re-enacted, and that the Code be amended by
adding thereto three new sections numbered forty-two hundred fifty-one-c
one, forty-two hundred fiftv-one-c two, and forty-two hundred fifty-one-c
three, as follows:

Section 4251-c. Standard Provisions Required in Life Insurance Pol-
icies.—(a) From and after the first day of January, nineteen hundred
thirty-seven, no policy of life insurance, other than industrial insurance,
annuities, and pure endowments with or without return of premiums or
ot premiums and interest, shall be issued or delivered in this State or be
issued by a life insurance company organized under the laws of this
State, unless the same shall contain in substance the following provisions:

First. A provision that all premiums after the first premium shall be
payable in advance, either at the home office of the company or to an agent
ot the company, upon delivery of a receipt signed by one or more of the
othcers who shall be designated in the policy.

Second. A provision that the insured is entitled to a period of grace
either of thirty days or of one month within which the payment of any
premium after the first year may be made, subject at the option of the
company to an interest charge not in excess of six per centum per an-
num for the number of days of grace elapsing before the payment of the
premium, during which period of grace the policy shall continue in full
force, but in case the policy becomes a claim during the period of grace
before the overdue premium or the deferred instalments of premium of
the current policy year, if any, are paid, the amount of such premium,
or instalments, with interest on any overdue premium, may be deducted
from any amount payable under the policy in settlement. The period of
grace shall date from the premium-paying date stated in the policy.

Third. A provision that, except as otherwise expressly provided by
law, the policy shall constitute the entire contract between the parties
and shall be incontestable after it has been in force during the lifetime of
the insured for a period of not more than one year from its date, except
for non-payment of premiums and except for violation of the conditions
of the policy relating to naval or military service in time of war, at the
option of the company, provisions relative to benefits in the event of total
and permanent disability and provisions which grant additional insur-
ance specifically against death by accident may also be excepted ; that all
statements made by the insured shall, in the absence of fraud, be deemed
representations and not warranties; and that no such statement or state-
ments shall be used in defense of a claim under the policy unless contained
in a written application and unless a copy of such statement or statements
he endorsed upon or attached to the policy when issued.

Fourth. A provision that if it shall be found at any time before final
settlement under the policy that the age of the insured (or the age of the
beneficiary, if considered in determining the premium) has been mis-
stated, the amount payable under the policy shall be such as the premium
would have purchased at the correct age, according to the company’s
published rate at date of issue.

Fifth. A provision that the policy shall participate in the surplus of
the company, and any policy containing provision for participation at the
end of the first policy year, and annually thereafter, may also provide that
each dividend shall be paid subject to the payment of the premiums for
the next ensuing year; and the insured under any annual dividend policy
shall have the right each year to have the dividend arising from the par-
ticipation paid in cash, and if the policy shall provide other dividend op-
tions, it shall further provide which of the options shall be effective if the
insured shall not elect any option on or before the expiration of the period
of grace allowed for the payment of the premium. This provision shall
not apply to any form of paid-up insurance, temporary insurance, or pure
endowment insurance, issued or granted in exchange for lapsed or sur-
rendered policies, or to non-participating policies.

sixth. A provision that after the policy has been in force three full
years, the company 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, a sum equal to, or, at the option
of the insured less than, the amount required by section forty-two hun-
dred fifty-one-c three under the conditions specified thereby ; and that the
company will deduct from such loan value any indebtedness not already
deducted in determining the value 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. This provision shall not be
required in term insurance. The policy may further provide that if the
interest on the loan is not paid when due, it shall be added to the existing
loan, and shall bear interest at the same rate.

Seventh. A provision for non-forfeiture benefits, specifying the
options to which the policyholder is entitled, in accordance with the re-
quirements of section forty-two hundred fifty-one-c one (a) or section
forty-two hundred fifty-one-c two.

Eighth. A provision for cash surrender values in accordance with
the requirements of section forty-two hundred fifty-one-c (a) or section
forty-two hundred fifty-one-c two.

Ninth. A table showing in figures the loan values and the options, if
any, available under the policy each year upon default in premium pay-
ments, during at least the first twenty years of the policy or during the
premium-paying period if less than twenty years.

Tenth. A provision that if in event of: default in premium payments
the value of the policy shall have been applied automatically to the pur-
chase of other insurance as provided for in this section, and 1f such in-
surance shall be in force and the original policy shall not have been sur-
rendered to the company and cancelled, the policy may be reinstated
within three years from such default, upon evidence of insurability satis-
factory to the company and payments of arrears of premiums and the
payment or reinstatement of any other indebtedness to the company upon
said policy, with interest on said premiums and indebtedness at a rate not
exceeding six per centum per annum payable annually, and that such
reinstated policy shall be contestable, on account of fraud or misrepresen-
tation of material facts pertaining to the reinstatement, for the same
period after reinstatement as provided in the policy with respect to orig-
inal issue. —
Eleventh. A provision that when a policy shall become a claim by the
death of the insured, settlement shall be made upon receipt of due proof
of death.

Twelfth. A table showing the amount of instalments, if any, in which
the policy may provide its proceeds may be payable.

Thirteenth. Title on the face and on the back of the policy, briefly
and accurately describing its form.

(b) Any of the foregoing provisions or portions thereof not applica-
ble to single premium policies shall to that extent not be incorporated
therein; and any policy of life insurance may be issued or delivered in
this State which in the opinion of the State Corporation Commission con-
tains provisions on any one or more of the several foregoing requirements
more favorable to the policyholder than hereinbefore required.

(c) The provisions of this section shall not apply to policies of re-
insurance, or to policies issued or granted in exchange for lapsed or sur-
rendered policies or to group insurance, or to fraternal benefit societies as
defined and regulated in chapter one hundred seventy-one of the Code
of Virginia.

Section 4251-c 1. Non-forfeiture Benefits and Cash Surrender Values
in Policies Issued Prior to Operative Date of Section forty-two hundred
hfty-one-c two.—(a) This subsection shall apply only to policies of life
insurance issued prior to the operative date of section forty-two hundred
fifty-one-c two.

The non-forfeiture benefit referred to in paragraph seventh of sub-
section (a) of section forty-two hundred fifty-one-c shall be available
to the insured in event of default in premium payments, after premiums
shall have been paid for three full years (any premium paid for the in-
sured under any policy provision not being considered as in default), and
shall be a stipulated form of insurance, effective from the due date of the
defaulted premium, the net value of which shall be at least equal to the
reserve at the date of default on the policy and on dividend additions
thereto, if any, exclusive of the reserve on account of return premium
insurance and on total and permanent disability and additional accidental
death benefits, less a sum not more than two and one-half per centum
of the amount insured by the policy and of any dividend additions thereto
(the policy to specify the mortality table and rate of interest adopted for
computing such reserve), and less any existing indebtedness to the com-
pany on or secured by the policy ; a company may, however, in lieu of the
provision herein permitted for the deduction from the reserve of a sum
not more than two and one-half per centum of the amount insured by the
policy, and of any dividendeadditions thereto, insert in the policy a pro-
vision that one-fifth of the reserve may be deducted, or may provide there-
in that a deduction may be made of two and one-half per centum of the
amount insured by the policy or one-fifth of the reserve, at the option of
the company. The cash surrender value referred to in paragraph eighth
of subsection (a) of section forty-two hundred fifty-one-c shall be avail-
able upon surrender of the policy to the company at its home office within
one month of the date of the defaulted premium and shall be at least equal
to the sum which would otherwise be available for the purchase of insur-
ance as aforesaid; and provided, further, that the company may defer
payment for not more than three months after the application therefor
is made. If more than one option is provided, the policy shall provide
which of the options shall be effective if the insured shall not elect any
option on or before the expiration of the period of grace allowed for the
payment of the premium. A‘provision may also be inserted in the policy
that in event of default in a premium payment before the options become
available the reserve on any dividend additions then in force may, at the
option of the company, 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. This subsection shall apply to policies of term
insurance only if the term is for more than twenty years.

(b) This subsection shall apply only to policies of industrial life in-
surance issued prior to the operative date of section forty-two hundred
fifty-one-c two.

The non-forfeiture benefits referred to in paragraph fifth of subsec-
tion (a) of section forty-two hundred fifty-eight-l shall be available in
event of default in premium payments, after premiums have been paid
for five full years, without action on the part of the insured, and shall
be a stipulated form of insurance, effective from the due date of the de-
faulted premium, the net value of which stipulated form of insurance
shall not be less than the reserve on the policy (exclusive of reserves, if
any, for provisions relating to benefits in the event of specific types of
disability, for provisions granting additional insurance specifically against
death by accident, and for provisions granting other benefits in addition
to life insurance) at the end of the last completed policy year for which
premiums have been paid, and on any dividend additions thereto, if any,
(the policy to specify mortality table, rate of interest and method of valua-
tion adopted for computing such reserve) less a specified maximum per-
centage (not more than two and one-half) of the maximum face amount
insured by the policy and of dividend additions thereto, if any, and less
any existing indebtedness to the company on or secured by the policy.
The policy shall also specify the percentage or other rule of calculation
so as to pernnt determination of the values for each year for which re-
quired values are not included in the policy. A company may, in lieu
of the provision herein permitted for the deduction from the reserve of a
sum not more than two and one-half per centum of the maximum face
amount insured by the policy and of any dividend additions thereto, in-
sert in the policy a provision that one-fifth of the reserve may be de-
ducted, or may provide therein that a deduction may be made of two and
one-half per centum of the maximum face amount insured by the policy
or one-fifth of the reserve at the option of the company. If more than
one option is provided, the policy must also provide which of the options
shall apply in the event of the insured’s failure to notify the company
of his selection of an option. The cash surrender value referred to in
paragraph sixth of subsection (a) of section forty-two hundred fifty-
eight-] shall be available after premiums have been paid for ten full
years upon surrender of the policy to the company at its home office
within three months of the due date of the defaulted premium and shall
st equal to the sum which would otherwise be available for the
of insurance as aforesaid; and, provided, further, that the
may defer payment for not more than three months after the
mn therefor is made. This subsection shall not be required in
irance of twenty years or less, but such term policy shall specify
ality table, rate of interest and method of valuation adopted for
ig reserves.
yn 4251-c 2. Standard Non-forfeiture Law.—(a) In the case
s issued on or after the operative date of this section, as defined
‘tion (a), no policy of life insurance, except as stated in sub-
{), shall be issued or delivered in this State unless it shall con-
ubstance the following provisions, or corresponding provisions
the opinion of the State Corporation Commission are at least
ible to the defaulting or surrendering policyholder :

That, in the event of default in any premium payment, the com-
pany will grant, upon proper request not later than sixty days
after the due date of the premium in default, a paid-up non-for-
feiture benefit on a plan stipulated in the policy, effective as of
such due date, of such value as may be hereinafter specified.

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 ordi-
nary insurance or five full years in the case of industrial insur-
ance, the company will pay, in lieu of any paid-up non-forfeiture
benefit, a cash surrender value of such amount as may be here-
inafter specified.

That a specified paid-up non-forfeiture benefit shall become ef-
fective 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.

That, if the policy shall have become paid up by completion of
all premium payments or if it is continued under any paid-up
non-forfeiture benefit which become 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
days after any policy anniversary, a cash surrender value of such
amount as may be hereinafter specified.

A statement of the mortality table and interest rate used in cal-
culating the cash surrender values and the paid-up non-for-
feiture benefits available under the policy, together with a table
showing the cash surrender value, if any, and paid-up non-
forfeiture 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 company on the policy.
(6) <A statement of the method to be used in calculating the cash
surrender value and the paid-up non-forfeiture benefits avail-
able under the policy on any policy anniversary with an ex-
planation of the manner in which the cash surrender values and
the paid-up non-forfeiture benefits are altered by the existence
of any paid-up additions credited to the policy or any indebted-
ness to the company on 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 months after demand therefor
with surrender of the policy.

(b) 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 subsection (a), 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 (1) the then present value of the adjusted premiums as
defined in subsection (d), corresponding to premiums which would have
fallen due on and after such anniversary, and (11) the amount of any
indebtedness to the company on the policy. 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 non-forfeiture benefit whether or not required by sub-
section (a), shall be an amount not less than the present value, on such
anniversary, of the future guaranteed benefits provided for by the pol-
icy, including any existing paid-up additions, decreased by any indebted-
ness to the company on the policy.

(c) Any paid-up non-forfeiture benefit available under the policy in
the event of default in a premium payment due on any policy anniver-
sary 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, equal to that cash surrender value which
would have been required by this section in the absence of the condition
that premiums shall have been paid for at least a specified period.

(d) The adjusted premiums for any policy shall be calculated on an
annual basis and shall be such uniform percentage of the respective pre-
miums specified in the policy for each policy year that the present value,
at the date of issue of the policy, of all such adjusted premiums shall be
equal to the sum of (i) the then present value of the future guaranteed
benefits provided for by the policy; (ii) two per centum 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; (iii) forty per centum of the adjusted pre-
mium for the first policy year; (iv) twenty-five per centum of either tke
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 (iii) and (iv) above, no adjusted
premium shall be deemed to exceed four per centum (4%) of the amount
of insurance or level amount equivalent thereto. The date of issue of a
policy for the purpose of this subsection shall be the date as of which
the rated age of the insured is determined.

In the case of a policy providing an amount of insurance varying with
duration of the policy, the equivalent level amount thereof for the pur-
pose of this subsection shall be deemed to be the level amount of insur-
ance provided by an otherwise similar policy, containing the same en-
dowment 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.

All adjusted premiums and present values referred to in this section
shall be calculated on the basis of the Commissioners 1941 Standard Or-
dinary Mortality Table for ordinary insurance and the 1941 Standard
Industrial Mortality Table for industrial insurance and the rate of inter-
est, not exceeding three and one-half per centum (314%) per annum,
specified in the policy for calculating cash surrender values and paid-up
non-forfeiture benefits. Provided, however, that in calculating the pres-
ent value of any paid-up term insurance with accompanying pure endow-
ment, if any, offered as a non-forfeiture benefit, the rates of mortality as-
sumed may be not more than one hundred and thirty per centum (130%)
of the rates of mortality according to such applicable table. Provided,
further, that 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 company and ap-
proved by the Commission.

(e) Any cash surrender value and any paid-up non-forfeiture bene-
fit, available under the policy in the event of default in a premium pay-
ment due at any time other than on the policy anniversary, shall be cal-
culated with allowance for the lapse of time and the payment of frac-
tional premiums beyond the last preceding policy anniversary. All values
referred to in subsections (b), (c) and (d) 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 dividends used to provide
such additions. Notwithstanding the provisions of subsection (b), addi-
tional benefits payable (1) in the event of the death or dismemberment
by accident or accidental means, (2) in the event of total and permanent
disability, (3) as reversionary annuity or deferred reversionary annuity
benefits, (4) as decreasing term insurance benefits provided by a rider or
supplemental policy provision to which, if issued as a separate policy,
this section would not apply, and (5) as other policy benefits additional
to life insurance and endowment benefits, and premiums for all such ad-
ditional benefits, shall be disregarded in ascertaining cash surrender values
and non-forfeiture benefits required by this section, and no such addi-
tional benefits shall be required to be included in any paid-up non-for-
feiture benefits.

(f) This section shall not apply to fraternal benefit societies as de-
fined and regulated in chapter one hundred seventy-one of the Code of
Virginia, nor to any reinsurance, group insurance, pure endowment, an-
nuity or reversionary annuity contract, nor to any term policy of uniform
amount or renewal thereof, of fifteen years or less expiring before age
sixty-six, for which uniform premiums are payable during the entire term
of the policy, nor to any term policy of decreasing amount on which each
adjusted premium, calculated as specified in subsection (d), is less than
the adjusted premium, so calculated, on such fifteen-year term policy is-
sued at the same age and for the same initial amount of insurance, nor to
any policy which shall be delivered outside this State through an agent or
other representative of the company issuing the policy.

(g) After the effective date of this act, any company may file with
the Commission a written notice of its election to comply with the pro-
visions of this section after a specified date before January first, nineteen
hundred forty-eight. After the filing of such notice then upon the speci-
fied date (which shall be the operative date for such company), this sec-
tion 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 section for the company shall be January first, nineteen hun-
dred forty-eight.

Section 4251l-c 3. Loan Provisions in Policies—(a) In the case of
those policies issued prior to the operative date of section forty-two hun-
dred fifty-one-c two, the loan value referred to in paragraph sixth of sub-
section (a) of section forty-two hundred fifty-one-c shall be the reserve
at the end of the current policy year on the policy and on the dividend
additions thereto, if any, exclusive of the reserve on account of return
premium insurance and of total and permanent disability and additional
accidental death benefits, less a sum not more than two and one-half per
centum of the amount insured by the policy and of any dividend addi-
tions thereto (the policy to specify the mortality table and rate of in-
terest adopted for computing such reserve). The policy may further
provide that such loan may be deferred for not exceeding three months
after the application therefor is made. A company may, in lieu of the
provision hereinabove permitted for the deduction from a loan on the
policy of a sum not more than two and one-half per centum of the amount
insured by the policy and of any dividend additions thereto, insert in the
policy a provision that one-fifth of the reserve may be deducted in case
of a loan under the policy, or may provide therein that the deduction
may be two and one-half per centum of the amount insured by the policy
or one-fifth of the reserve at the option of the company.

(b) In the case of policies issued on or after the operative date of
section forty-two hundred fifty-one-c two the loan value referred to in
paragraph sixth of subsection (a) of section forty-two hundred fifty-
one-c shall be the cash surrender value at the end of the current policy
year as required by section forty-two hundred fifty-one-c two. The com-
pany shall reserve the right to defer such loan, except when made to pay
premiums, for six months after application therefor is made.

Section 4257. State Corporation Commission to Value Policies.—
Legal Standards of Valuation—(a) The State Corporation Commis-
sion shall annually value or cause to be valued, the reserve liabilities
(hereinafter called reserves) for all outstanding life insurance policies
and annuity and pure endowment contracts of every life insurance com-
pany doing business in this State, and may certify the amount of any
such reserves, specifying the mortality table or tables, rate or rates of
interest and methods (net level premium method or other) used in the
calculation of such reserves. In calculating such reserves, the Commis-
sion may use group methods and approximate averages for fractions
of a year or otherwise. The Commission may accept a certificate of
valuation from the company for the reserve liability for the disability
provision incorporated in life insurance policies if the Commission is
satisfied (by the use of general averages and percentages) that such re-
serve has been computed in accordance with the rules provided herein.
In lieu of the valuation of the reserves herein required of any foreign or
alien company, the Commission may accept any valuation made, or caused
to be made, by the insurance supervisory official of any state or other
jurisdiction when such valuation complies with the minimum standard
herein provided and if the official of such state or jurisdiction accepts
as sufficient and valid for all legal purposes the certificate of valuation
of the Commission when such certificate states the valuation to have been
made in a specified manner according to which the aggregate reserves
would be at least as large as if they had been computed in the manner
prescribed by the law of that state or jurisdiction.

Any company which at any time shall have adopted any standard
of valuation producing greater aggregate reserves than those calculated
according to the minimum standard herein provided may, with the ap-
proval of the Commission, adopt any lower standard of valuation, but
not lower than the minimum herein provided.

(b) This subsection shall apply only to those policies and con-
tracts issued prior to the operative date of section forty-two hundred
fifty-one-c two.

(1) The legal minimum standard for the valuation of life insur-
ance contracts issued prior to the first day of January, nineteen hundred
thirty-seven, shall be on the basis of the American Experience Table of
Mortality, with interest at four per centum per annum, and strictly in
accordance with the terms and conditions of said contracts, and for life
insurance contracts issued on and after said date shall be the one year
preliminary term method of valuation, as hereinafter modified, on the
basis of the American Experience Table of Mortality, (or at the option
of the company, the American Men Ultimate Table of Mortality) with in-
terest at three and one-half per centum per annum.

(2) If the net renewal premium under a limited payment life
preliminary term policy providing for the payment of less than twenty
annual premiums thereon, or under an endowment preliminary term pol-
icy, exceeds that under a twenty payment life preliminary term policy,
the reserve for such policy at the end of any year, including the first, shall
be not less than the reserve on a twenty payment life preliminary term
policy issued in the same year and at the same age, together with an
amount which shall be equivalent to the accumulation of a net level pre-
mium sufficient to provide for a pure endowment maturing one year
after the date on which the last annual premium is due, or at the end of
twenty years if the policy provides for the payment of premiums for
more than twenty years, equal to the difference between the value on
such maturity date of such a twenty payment life preliminary term policy
and the full net level premium reserve at such time of such a limited pay-
ment life or endowment policy. Policies valued by the above method
shall contain a clause specifying either that the reserve thereof shall be
computed in accordance with the twenty payment life modification of the
preliminary term method of valuation, or that the first year’s insurance
is term insurance.

(3) The legal minimum standard for the valuation of annuities
issued on and after the first day of January, nineteen hundred thirty-
seven shall be the Combined Annuity Table, with interest at four per
centum per annum, but annuities deferred ten or more years and written
in connection with life insurance shall be valued on the same basis as that
used in computing the consideration or premium therefor, or upon any
higher standard, at the option of the company.

(4) The legal minimum standard for the calculation of the reserve
liability for insurance against disability incorporated in life insurance
policies issued on and after the first day of January, nineteen hundred
thirty-seven, shall be on the basis of any table adopted by the com-
pany, and approved by the Commission, with interest at three and one-
half per centum per annum; provided, that in no case shall said liability
be less than one-half of the net annual premium for the disability benefit
computed by such table. ,

(5) The legal standard for the valuation of group insurance writ-
ten as yearly renewable term insurance issued on and after the first day
of January, nineteen hundred thirty-seven, shall be on the basis of the
American Men Ultimate Table of Mortality with interest at three and
one-half per centum per annum.

(6) The legal minimum standard for the valuation of industrial
policies, issued on and after the first day of January, nineteen hundred
thirty-seven, shall be the American Experience Table of Mortality, with
interest at three and one-half per centum per annum, provided, that any
life insurance company may voluntarily value its industrial policies on the
basis of the standard industrial mortality table or the substantard indus-
trial mortality table, and by the level net premium method or in accord-
ance with their terms by the modified preliminary term method herein-
above described, or the full preliminary term method.

All industrial policies issued on and after the date set forth herein
shall be valued under the rules set forth in this section, whether or not
such policies provide for surrender values, either in cash, paid-up insur-
ance or extended insurance.
(7) The Commission may vary the standards of interest and mor-
tality in the case of alien companies as to contracts issued by such com-
panies in other countries than the United States, and in particular cases
of invalid lives and other extra hazards.

(8) In every case in which the actual annual premium charged for
an insurance is less than the net annual premium for such insurance,
computed as specified in this subsection, the company shall set up an ad-
ditional reserve equal to the value of an annuity of the difference be-
tween the actual premium charged and the net premium required by
this subsection, and the term of which at the date of the valuation shall
equal the period during which future premium payments are to become
due on the insurance, and such annuity shall be valued according to the
table of mortality with the rate of interest at which such net annual pre-
mium is calculated.

(9) Reserves for all such policies and contracts, or all of any class
thereof, may be calculated, at the option of the company, according to any
standards which produce greater aggregate reserves for all such policies
and contracts, or all of the class thereof so valued, than the minimum
reserves required by this subsection; and in every such case the com-
pany shall report the standards used by it in making the valuation to the
Commission in its annual statement.

(c) This subsection shall apply only to those policies and contracts
issued on or after the operative date of section forty-two hundred fifty-
one-c two.

(1) The minimum standard for the valuation of all such policies and
contracts shall be the Commissioners reserve valuation method defined in
paragraph (2) of this sub-section, three and one-half per centum
(314%) interest, and the following tables:

(i) For all ordinary policies of life insurance issued on the stand-
ard basis, excluding any disability and accidental death bene-
fits in such policies, the Commissioners 1941 Standard Ordi-
nary Mortality Table.

(ii) For all industrial life insurance policies issued on the stand-
ard basis, excluding any disability and accidental death bene-
fits in such policies, the 1941 Standard Industrial Mortality
Table.

(i111) For annuity and pure endowment contracts, excluding any dis-
ability and accidental death benefits in such policies, the 1937
Standard Annuity Mortality Table.

(iv) For total and permanent disability benefits in or supplementary
to ordinary policies or contracts, Class (3) Disability Table
(1926) which, for active lives, shall be combined with a mor-
tality table permitted for calculating the reserves for life in-
surance policies.

(v) For accidental death benefits in or supplementary to policies,
(vi) For group life insurance, life insurance issued on the sub-
standard basis and other special benefits, such tables as may
be approved by the Commission.

(2) Reserves according to the Commissioners reserve valuation
method, for the life insurance and endowment benefits of policies pro-
viding for a uniform amount of insurance and requiring the payment of
uniform premiums shall be the excess, if any, of the present value, at
the date of valuation, of such future guaranteed benefits provided for by
such policies, over the then present value of any future modified net
premiums therefor. The modified net premiums for any such policy
shall be such uniform percentage of the respective contract premiums for
such benefits that the present value, at the date of issue of the policy,
of all such modified net premiums shall be equal to the sum of the then
present value of such benefits provided for by the policy and the excess
of (A) over (B), as follows: .

(A) A net level annual premium equal to the present value, at the
date of issue, of such benefits provided for after the first
policy year, divided by the present value, at the date of issue,
of an annuity of one per annum payable on the first and each
subsequent anniversary of such policy on which a premium
falls due; provided, however, that such net level annual pre-
mium shall not exceed the net level annual premium on the
nineteen-year premium whole life plan for insurance of the
same amount at an age one year higher than the age at issue
of such policy.

(B) A net one year term premium for such benefits provided for
in the first policy year.

Reserves according to the Commissioners reserve valuation method
for (1) life insurance policies providing for a varying amount of insur-
ance or requiring the payment of varying premiums, (ii) annuity and
pure endowment contracts, (111) disability and accidental death benefits
in all policies and contracts, and (iv) all other benefits, except life insur-
ance and endowment benefits in life insurance policies, shall be calculated
by a method consistent with the principles of this paragraph (2).

(3) In no event shall a company’s aggregate reserve for all life in-
surance policies, excluding disability and accidental death benefits, be less
than the aggregate reserves calculated in accordance with the method set
forth in paragraph (2) and the mortality table or tables and rate or
rates of interest used in calculating non-forfeiture benefits for such
policies.

(4) Reserves for any category of policies, contracts or benefits as
established by the Commission may be calculated, at the option of the
company, according to any standards which produce greater aggregate
reserves for such category than those calculated according to the mini-
mum standard herein provided, but the rate or rates of interest used
shall not be higher than the corresponding rate or rates of interest used
in calculating any non-forfeiture benefits provided for therein. Pro-
vided, however, that reserves for participating life insurance policies may,
with the consent of the Commission, be calculated according to a rate of
interest lower than the rate of interest used in calculating the non-for-
feiture benefits in such policies, with the further proviso that if such
lower rate differs from the rate used in the calculation of the non-for-
feiture benefits by more than one-half per centum (12%) the company
issuing such policies shall file with the Commission a plan providing for
such equitable increases, if any, in the cash surrender values and non-
forfeiture benefits in such policies as the Commission shall approve.

(5) If the gross premium charged by any life insurance company
on any policy or contract is less than the net premium for the policy or
contract according to the mortality table, rate of interest and method
used in calculating the reserve thereon, there shall be maintained on such
policy or contract a deficiency reserve in addition to all other reserves
required by law. For each such policy or contract the deficiency reserve
shall be the present value, according to such standard, of an annuity of the
difference between the net premium and the premium charged for the
policy or contract, running for the remainder of the premium-paying
period

(d) The Commission is hereby authorized to assess against every
company whose policies are valued, a sum not exceeding one cent for
each one thousand dollars of insurance in force, which shall be paid into
the treasury of the Commonwealth, as provided in section forty-one
hundred ninety-seven, and placed by the State Comptroller to the credit
of the fund for the maintenance of the Bureau of Insurance. Every
company organized under the laws of another State or country shall
furnish to the Commission, at the time of filing its annual statement, a
certificate from the Commissioner of Insurance (or similar officer) of
that state or country, that he has made a valuation of the policies of the
company in force on December thirty-first, and that he finds the value
of its policies to be as reported in the company’s annual statement. Any
company failing to furnish this certificate shall have its policies valued
by the Commission, as above provided.

(e) Nothing in this section shall be construed to apply to fraternal
benefit societies, as defined and regulated in chapter one hundred sev-
enty-one, nor to industrial sick benefit companies as defined and regu-
lated in chapter one hundred seventy-five.

Section 4258-1. Standard Provisions Required in Industrial Life In-
surance Policies; Provisions Prohibited; Policy Forms to Be Filed With
State Corporation Commission.—(a) From and after the first day of
January, nineteen hundred thirty-eight no policy of industrial life insur-
ance shall be issued or delivered to take effect in this State, or be issued
by an industrial life insurance company organized under the laws of
this State, unless the same shall contain in substance the following pro-
visions :

First. A provision that the insured is entitled to a period of grace of
four weeks within which the payment of any premium after the first may
be made, which period of grace shall terminate at noon on the twenty-
eighth day after the due date of the defaulted premium, except that where
premiums are payable monthly the insured shall be entitled to a grace
period of one month or thirty days. During such period of grace the
poucy shall continue in full force, but in case the policy becomes a claim
during said grace period, before the overdue premiums are paid, the
amount of overdue premiums may be deducted in any settlement under
this policy. |

Second. A provision that the policy, including the application, whether
or not a copy thereof be attached to or endorsed on the policy, shall con-
tain the entire contract between the parties.

Third. A provision that, except as otherwise expressly provided by

law, the policy shall be incontestable after it has been in force, during the
lifetime of the insured, for one year from its date, except for nonpay-
ment of premiums and except for violation of the conditions of the policy
relating to naval or military service in time of war, and except as to pro-
‘visions and conditions relating to benefits in the event of certain specific
types of disability and those granting additional insurance specifically
against death by accident.
_. Fourth. A provision that if it shall be found at any time before final
settlement of the policy that the age of the insured has been misstated
the amount payable under the policy shall be such as the premium would
have purchased at the correct age at the time the policy was issued.

Fifth. A provision for non-forfeiture benefits in accordance with the
requirements of section forty-two hundred fifty-one-c one (b) or section
forty-two hundred fifty-one-c two.

Sixth. A provision for cash surrender values in accordance with the
requirements of section forty-two hundred fifty-one-c one (b) or section
forty-two hundred fifty-one-c two.

Seventh. A provision that the policy, if not surrendered for its cash
value or if the period of extended term insurance has not expired, may be
reinstated within one year from the date of default in payment of pre-
miums upon payment of all overdue premiums and, at the option of the
company, interest thereon at a rate not to exceed six per centum per an-
num, and upon the presentation of evidence satisfactory to the company
of the insurability of the insured.

Eighth. A table showing in figures the non-forfeiture options avail-
able under the policy each year upon default in the payment of premiums
during at least the first twenty years of the policy, and providing that the
company will furnish, upon request, an extension of such table beyond
the years shown in the policy.

Ninth. <A provision that when a policy shall become a claim by the
death of the insured settlement shall be made not later than two months
after the receipt of due proof of death.

Tenth. Title on the face of the policy clearly and correctly describ-
ing its form.

(b) Any such policy may be issued or delivered in this State which
in the opinion of the State Corporation Commission contains provisions
on any one or more of the several foregoing requirements more favorable
to the policyholder than hereinbefore required. The policies of an insur-
ance company organized under the laws of any other state or foreign
government may contain, when issued in this State, any provision which
may be prescribed by the laws of the state or government under which
the company is organized, and the policies of a life insurance company
organized under the laws of this State, when issued in any other state,
territory or foreign country, may contain any provision required by the
laws of such state, territory or foreign country to be contained in the
policies issued therein.

(c) From and after the first day of January, nineteen hundred
thirty-eight, no policy of industrial life insurance shall be issued or de-
livered in this State, or be issued by an industrial life insurance com-
pany organized under the laws of this State, if it contains any of the
following provisions:

First. A provision limiting the time within which any action at law
or in equity may be commenced to less than one year after the cause of
action shall accrue. ,

Second. A provision for any mode of settlement at maturity of less

value than the amount insured by the policy plus dividend additions
thereto, if any, less any indebtedness to the company on or secured by
the policy and less any premium that may by the terms of the policy
be deducted, payments to be made in accordance with the terms of the
policy.
Third. A provision to the effect that the agent soliciting the insurance
is the agent of the person insured under said policy, or making the acts
or representations of such agent binding upon the person so insured un-
der said policy. :

(d) The provisions of this section shall not apply to policies issued
or granted pursuant to the non-forfeiture provisions prescribed in para-
graph (fifth) of subsection (a).

(e) No policy of industrial life insurance shall be issued or delivered
in this State until the form of the same has been filed with the Commis-
sion, nor after written notice from the Commission, given within thirty
days of such filing to the company filing such form, showing wherein
the form of such policy does not comply with the requirements of the
laws of this State.