Chap. 301.—An ACT to amend and reenact Section 4251-c 2 of the Code of
Virginia, as amended, relating to non-forfeiture benefits under life insurance
policies. {S 85]

Approved March 17, 1948

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, as amended, be amended and reenacted so as to
read as follows: :

Section 4251-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 subsection (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 Corpora-
tion Commission are at least as favorable to the defaulting or sur-
rendering policyholder:

That, in the event of default in any premium payment, the
company 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 comple-
tion 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.

(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 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 brief and general statement of the method to be used in
calculating the cash surrender value and the paid-up non-forfeiture
benefits available under the policy on any policy anniversary beyond
the last anniversary for which such values and benefits are con-
secutively shown in the policy, with an explanation 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 indebtedness to the company on the

olicy.
P Any of the foregoing provisions or portions thereof not appli-
cable by reason of the plan of insurance may, to the extent inappli-
cable, 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 anni-
versary, 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 (i) the
then present value of the adjusted premiums as defined in sub-
section (d), corresponding to premiums which would have fallen
due on and after such anniversary, and (ii) the amount of any in-
debtedness 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 present value, on such anniversary, of the future guaran-
teed benefits provided for by the policy, including any existing
paid-up additions, decreased 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 on any policy
anniversary shall be such that its present value as of such anniver-
sary shall be at least equal to the cash surrender value then pro-
vided for by the policy or, if none is provided for, equal to that
cash surrender value which would have been required by this sec-
tion 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 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 (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
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
uniform amount with uniform premiums for the whole of life
issued at the same age for the same amount of insurance, which-
ever 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 purpose of this subsection shall be deemed to be the level
amount of insurance provided by an otherwise similar policy, con-
taining the same endowment benefit or benefits, if any, issued at
the same age and for the same term, the amount of which does not
vary with duration and the benefits under which have the same
present value at the inception of the insurance as the benefits
under the policy.

All adjusted premiums and present values referred to in this
section shall be calculated on the basis of the Commissioner’s nine-
teen 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 exceeding three and one-half per centum (3%%) per
annum, specified in the policy for calculating cash surrender values
and paid-up non-forfeiture 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 insur-
ance 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
benefit, available under the policy in the event of default in a
premium payment due at any time other than on the policy anni-
versary, 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 (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. Not-
withstanding the provisions of subsection (b), additional benefits
payable (1) in the event of the death or dismemberment by accident
or accidental means, (2) in the event of total and permanent dis-
ability, (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 separ-
ate 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 surrender values and non-forfeiture benefits re-
quired by this section, and no such additional benefits shall be
required to be included in any paid-up non-forfeiture benefits.

(f) This section shall not apply to fraternal benefit societies as
defined and regulated in chapter one hundred seventy-one of the
Code of Virginia, nor to any reinsurance, group insurance, pure
endowment, annuity or reversionary annuity contract, or 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 issued 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 provisions of this section after a specified date before April
first, nineteen 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, nineteen hundred forty-eight ; provided
that the Commission for good cause shown by any company, may
from time to time extend the operative date as to such company
to not later than January one, nineteen hundred forty-nine.

2. An emergency existing, this act shall be in force from and
after its passage.