Chap. 326.—An ACT to amend and re-enact Section 425l-c 2 of the Code of
Virginia, relating to non-forfeiture benefits under life insurance poles:

B 196}
Approved March 27, 1946

Be it enacted by the General Assembly of Virginia:

1. That section forty-two hundred and fifty-one-c two of the Code
of Virginia be amended and re-enacted so as to read as follows:

Section 4251l-c 2. Standard non-forfeiture law.—(a) In the case
of policies issued on or after the operative date of this section, as defined
in subsection (g), no policy of life insurance, except as stated in subsec-
tion (f), shall be issued or delivered in this State unless it shall contain
in substance the following provisions, or corresponding provisions which
in the opinion of the State Corporation Commission are at least as favor-
able to the defaulting or surrendering policyholder: >

(1) 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-forfeiture benefit on a
plan stipulated in the policy, effective as of such due date, of such value
as may be hereinafter specified.

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

(3) That a specified paid-up non-forfeiture benefit shall become
effective as specified in the policy unless the person entitled to make such
selection elects another available option not later than sixty days after
the due date of the premium in default.

(4) That, if the policy shall have become paid up by completion of
all premium payments or if it 1s continued under any paid-up non-forfei-
ture benefit which become effective on or after the third policy anniver-
sary in the case of ordinary insurance or the fifth policy anniversary ir
the case of industrial insurance, the company will pay, upon surrender
of the policy within thirty days after any policy anniversary, a cash sur-
render value of such amount as may be hereinafter specified.
(5) A statement of the mortality table and interest rate used in
calculating the cash surrender values and the paid-up non-forfeiture
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 company on the policy.

(6) A brief and general statement of the method to be used in cal-
culating the cash surrender value and the paid-up non-forfeiture benefits
available under the policy on any policy anniversary beyond the last an-
niversary for which such values and benefits are consecutively shown in
the policy, with an explanation of the manner in which the cash sur-
render 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 (ii) 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 subsection (a), shall be an amount not less than the pres-
ent value, on such anniversary, of the future guaranteed benefits pro-
vided for by the policy, including any existing paid-up additions, de-
creased by any indebtedness 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 1s provided for, equal to that cash surrender value which
would have been required by this section in the absence of the condi-
tion 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
premiums 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 (1) the then present value of the future
guaranteed benefits provided for by the policy; (11) 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 ; (111) forty per centum of the
adjusted premium for the first policy year; (iv) twenty-five per centum
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 uni-
form amount with uniform premiums for the whole of life issued at the
same age for the same amount of insurance, whichever 1s less. Provided,
however, that in applying the percentage specified in (ii) 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
purpose of this subsection shall be deemed to be the level amount of in-
surance 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 sec-
tion shall be calculated on the basis of the Commissioners Nineteen
Hundred Forty-One Standard Ordinary Mortality Table for ordinary
insurance and the Nineteen Hundred Forty-one Standard Industrial
Mortality Table for industrial insurance and the rate of interest, not ex-
ceeding three and one-half per centum (342%) per annum, specified in
the policy for calculating cash surrender values and paid-up non-forfet-
ture benefits. Provided, however, that in calculating the present value
of any paid-up term insurance with accompanying pure endowment, if
any, offered as a non-forfeiture benefit, the rates of mortality assumed
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 approved 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 pro-
vide such additions. Notwithstanding the provisions of subsection (b),
additional benefits payable (1) in the event of the death or dismember-
ment by accident or accidental means, (2) in the event of total and per-
manent 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 additional benefits, shall be disregarded in ascertaining cash sur-
render values and non-forfeiture benefits required by this section, and no
such additional benefits shall be required to be included in any paid-up
non-forfeiture benefits.

({) 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 unless 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 issued at the same age and for the same initial amount of in-
surance, 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, nine-
teen hundred forty-eight. After the filing of such notice then upon the
specified date (which shall be the operative date for such company),
this section 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 April first, nine-
teen hundred forty-eight.