3 Colo. Code Regs. § 702-4-1-3-6

Current through Register Vol. 47, No. 16, August 25, 2024

Section 3 CCR 702-4-1-3-6 - Insurance Policy Requirements

A. Mandatory Policy Benefit and Design Requirements

Variable life insurance policies delivered or issued for delivery in this state shall comply with the following minimum requirements:

1. The policy benefits shall reflect the investment and expense experience, positive or negative, of separate account(s) established and maintained by the insurer for such policies. The allocation and determination of the variable benefits derived from such experience must be actuarially sound and shall not exceed the total separate account assets:

2. Each variable life insurance policy shall be credited with the full amount of the net investment return applied to the benefit base:

3. Any change(s) in variable death benefits of each variable life insurance policy shall be determined at least annually; and

4. 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 in the policy shall be in accordance with generally accepted 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 Part 3, Article 7 of Title 10, C.R.S. for a general account policy with such premiums and benefits. The assumed investment rate shall not exceed the maximum interest rate permitted under Part 3 of Article 7 of Title 10, C.R.S. If the policy does not state an assumed investment rate, this demonstration shall be based on the maximum interest rate permitted under Part 3 of Article 7 of Title 10, C.R.S.

B. Mandatory Policy Provisions

Every variable life insurance policy shall contain at least the following:

1. The cover page or pages corresponding to the cover page of each such policy shall contain the following:

a. A prominent statement in either contrasting color or in boldface type that the amount or duration of death benefit, cash values or other nonforfeiture benefits may be variable or fixed under specified conditions which may include minimum guarantees:

b. A statement describing any guaranteed minimum benefit:

c. The method, or a reference to the policy provision, which describes the method for determining the amount of insurance payable at death; and

d. Such other items as are currently required for fixed benefit life insurance policies and which are appropriate for the policy and not inconsistent with this regulation:

2. A provision for a grace period as follows:

a. For scheduled premium policies, a provision for a grace period of not less than thirty-one (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 sixty-one (61) days after the mailing date of the Report to Policyholders required by Section 9(C) of this regulation.

c. The death benefit payable during the grace period will equal the death benefit in effect immediately prior to such period less any overdue charges. If the policy processing day falls within the grace period, the insurer may require the payment of not more than three (3) times the charges due on that policy processing day, but only for those charges which are necessary to keep such policy in force until the next policy processing day:

3. For scheduled premium policies, a provision that the policy will be reinstated at any time within two (2) 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:

a. All overdue premiums with interest at a rate not exceeding six percent (6%) per annum compounded annually and any indebtedness in effect at the end of the grace period following the date of default with interest at a rate not exceeding eight percent (8%) per annum compounded annually; or

b. One hundred ten percent (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 six percent (6%) 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(s) to be used and stating that:

a. The assets of such separate account(s) 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; and

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 provision specifying that only the policy, application, and any documents attached thereto constitute the entire insurance policy;

7. A designation of the officers of the insurer who are empowered to make an agreement or representation on behalf of the insurer and an indication that statement by the insured, or on his behalf, shall be considered as representations and not warranties;

8. An identification of the owner of the insurance policy;

9. 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;

10. A statement of any conditions or requirements concerning the assignment of the policy;

11. A description of any adjustments in policy values to be made in the event of misstatement of age or sex of the insured;

12. A provision that the policy shall be incontestable by the insurer after it has been in force for two (2) years during the lifetime of the insured. However, any increase in the amount of the policy's death benefits subsequent to the policy issue date, which increase occurred upon a new application or request of the owner and was subject to satisfactory proof of the insured's insurability, shall be incontestable after any such increase has been in force, during the lifetime of the insured, for two (2) years from the date of issue of such increase. In addition, if the policy has lapsed and is subsequently reinstated, a new contestable period of two (2) years shall start on the date of reinstatement;

13. A provision that payment 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 (6) 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;

14. If settlement options are provided, at least one such option shall be on a fixed basis;

15. A description of the basis for computing the cash value and the surrender value under the policy shall be included;

16. Premiums or charges for insurance benefits with incidental insurance benefits stated separately;

17. Any other policy provisions required by this regulation;

18. Such other items as are currently required for fixed benefit life insurance policies which are appropriate for the policy and are not inconsistent with this regulation; and

19. If the investment policy of the separate account is materially changed, a provision giving policyholders the right to convert, without evidence of insurability, to an alternate plan in the separate or general account.

C. Policy Loan Provisions

Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this state shall contain a provision for policy loans after the policy has been in force for two (2) full years which provides the following:

1. At least seventy-five percent (75%) of the policy's cash surrender value may be borrowed.

2. Any indebtedness shall be deducted from the proceeds payable on death, or from the cash surrender value upon surrender or in determining any nonforfeiture benefit.

3. 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 thirty-one (31) days after the date of mailing of such notice. For flexible premium policies, whenever 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, a report must be sent to the policyholder which contains the information specified by Section 9(C) of this regulation.

4. 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 policyholder 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 one hundred ten percent (110%) of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request.

5. 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.

6. No policy loan provision is required if the policy is under extended term insurance nonforfeiture option.

7. Amounts 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.

D. Policy Guarantee Provisions

Except with specific prior written authorization from the Commissioner, any guaranteed policy benefit in a variable life insurance policy must be purchased from, and reserved in, the general account, with the appropriate transfer of sufficient cash or cash equivalent funds for the risk being transferred.

E. 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 state:

1. An exclusion for suicide within one year of the issue date of the policy; provided, however, that to the extent of the increased death benefits only, the policy may provide an exclusion for suicide within one year of any increase in death benefits which results from an application of the owner subsequent to the policy issue date;

2. Policies issued on a participating basis shall offer to pay dividend amounts in cash. In addition, such policies may offer dividend options available under general account products;

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 Subsection C of this section of this regulation, except that a restriction that no more than two (2) consecutive premiums can be paid under this provision may be imposed; or

4. A provision allowing the policyholder to make partial withdrawals.

3 CCR 702-4-1-3-6

37 CR 11, June 10, 2014, effective 7/1/2014

37 CR 12, June 25, 2014, effective 7/15/2014

Colorado Register, Vol 37, No. 14. July 25, 2014, effective 8/15/2014

37 CR 23, December 10, 2014, effective 1/1/2015

38 CR 03, February 10, 2015, effective 3/15/2015

38 CR 06, March 25, 2015, effective 4/30/2015

38 CR 09, May 10, 2015, effective 6/1/2015

38 CR 13, July 10, 2015, effective 7/30/2015

38 CR 19, October 10, 2015, effective 11/1/2015

38 CR 21, November 10, 2015, effective 1/1/2016

38 CR 23, December 10, 2015, effective 1/1/2016

39 CR 01, January 10, 2016, effective 2/1/2016

39 CR 05, March 10, 2016, effective 4/1/2016

39 CR 08, April 25, 2016, effective 5/15/2016

39 CR 19, October 10, 2016, effective 11/1/2016

39 CR 20, October 25, 2016, effective 1/1/2017

39 CR 22, November 25, 2016, effective 1/1/2017

39 CR 23, December 10, 2016, effective 1/1/2017

39 CR 23, December 25, 2016, effective 1/1/2017

40 CR 03, February 10, 2017, effective 3/15/2017

40 CR 09, May 10, 2017, effective 6/1/2017

40 CR 15, August 10, 2017, effective 9/1/2017

40 CR 17, September 10, 2017, effective 10/1/2017

40 CR 21, November 10, 2017, effective 12/1/2017

41 CR 04, February 25, 2018, effective 4/1/2018

41 CR 05, March 10, 2018, effective 6/1/2018

41 CR 08, April 25, 2018, effective 6/1/2018

41 CR 09, May 10, 2018, effective 6/1/2018

41 CR 11, June 10, 2018, effective 7/1/2018

41 CR 15, August 10, 2018, effective 9/1/2018

41 CR 17, September 10, 2018, effective 10/1/2018

41 CR 18, September 25, 2018, effective 10/15/2018

41 CR 21, November 10, 2018, effective 12/1/2018

41 CR 23, December 10, 2018, effective 1/1/2019

42 CR 01, January 10, 2019, effective 2/1/2019

41 CR 19, October 10, 2018, effective 3/1/2019

42 CR 03, February 10, 2019, effective 4/1/2019

42 CR 04, February 25, 2019, effective 4/1/2019

42 CR 06, March 25, 2019, effective 6/1/2019

42 CR 08, April 10, 2019, effective 6/1/2019

42 CR 15, August 10, 2019, effective 9/1/2019

42 CR 17, September 10, 2019, effective 10/1/2019

43 CR 02, January 25, 2020, effective 12/20/2019

43 CR 02, January 25, 2020, effective 12/23/2019

42 CR 23, December 10, 2019, effective 1/1/2020

43 CR 01, January 10, 2020, effective 2/1/2020

42 CR 24, December 25, 2019, effective 2/2/2020

43 CR 06, March 25, 2020, effective 4/15/2020

43 CR 10, May 25, 2020, effective 8/1/2020

43 CR 14, July 25, 2020, effective 8/15/2020

43 CR 17, September 10, 2020, effective 10/1/2020

43 CR 18, September 25, 2020, effective 11/1/2020

43 CR 22, November 25, 2020, effective 12/15/2020

43 CR 24, December 25, 2020, effective 1/15/2021

44 CR 03, February 10, 2021, effective 3/15/2021

44 CR 08, April 25, 2021, effective 5/15/2021

44 CR 09, May 10, 2021, effective 6/1/2021

44 CR 10, May 25, 2021, effective 6/14/2021

44 CR 10, May 25, 2021, effective 6/15/2021

44 CR 13, July 10, 2021, effective 8/1/2021

44 CR 15, August 10, 2021, effective 9/1/2021

44 CR 19, October 10, 2021, effective 11/1/2021

44 CR 21, November 10, 2021, effective 12/1/2021

44 CR 23, December 10, 2021, effective 12/30/2021

44 CR 21, November 10, 2021, effective 1/1/2022

44 CR 23, December 10, 2021, effective 1/15/2022

44 CR 24, December 25, 2021, effective 1/15/2022

45 CR 03, February 10, 2022, effective 3/2/2022

45 CR 08, April 25, 2022, effective 5/30/2022

45 CR 09, May 10, 2022, effective 5/30/2022

45 CR 10, May 25, 2022, effective 6/14/2022

45 CR 11, June 10, 2022, effective 6/30/2022

45 CR 11, June 10, 2022, effective 7/15/2022

45 CR 19, October 10, 2022, effective 11/1/2022

45 CR 20, October 25, 2022, effective 11/14/2022

45 CR 21, November 10, 2022, effective 11/30/2022

45 CR 24, December 25, 2022, effective 1/14/2023

46 CR 01, January 10, 2023, effective 2/14/2023

46 CR 06, March 25, 2023, effective 2/15/2023

46 CR 03, February 10, 2022, effective 3/2/2023

46 CR 04, February 25, 2023, effective 3/17/2023

46 CR 05, March 10, 2023, effective 4/15/2023

46 CR 09, May 10, 2023, effective 5/30/2023

46 CR 09, May 10, 2023, effective 6/1/2023

46 CR 10, May 25, 2023, effective 6/15/2023

46 CR 11, June 10, 2023, effective 6/30/2023