18 Del. Admin. Code § 1201-6.0

Current through Register Vol. 28, No. 5, November 1, 2024

Section 1201-6.0 - Contracts Providing for Variable Benefits

6.1 Any variable contract providing benefits payable in variable amounts delivered or issued for delivery in this State shall contain a statement of the essential features of the procedures to be followed by the insurer in determining the dollar amounts of such variable benefits. Any such contract or agreement, including a group contract and any certificate issued thereunder, shall state that such dollar amounts will vary to reflect investment experience of the separate account and shall contain on its first page or on the front cover of any certificate evidencing variable benefits issued pursuant to any variable contract on a group basis, in a prominent position, a clear statement to the effect that the benefits thereunder are on a variable basis.

6.2 Illustrations of benefits payable under any contract providing benefits payable in variable amounts shall not include projections of past investment experience into the future nor shall they attempt predictions of future investment experience; provided that nothing contained herein is intended to prohibit use of hypothetical assumed rates of return clearly designated as such, to illustrate possible levels of annuity payments.

6.3 No individual variable contract calling for the payment of periodic stipulated payments or premiums shall be delivered or issued for delivery in this State unless it contains in substance the following provisions, or provisions which in the opinion of the Commissioner are more favorable to the holders of such contracts:

6.3.1 a provision that there shall be a period of grace of 30 days or of one month, within which any stipulated payment or premium to the insurer falling due after the first may be made, during which period of grace the contract shall continue in force. The contract may include a statement of the basis for determining the date as of which any such payment received during the period of grace shall be applied to produce the values under the contract arising therefrom.

6.3.2 a provision that, at any time, within no less than one year from the date of default in making periodic stipulated payments or premiums to the insurer during the life of the annuitant, and unless the cash surrender value has been paid, the contract may be reinstated upon payment to the insurer of such overdue payments as required by the contract, and of all indebtedness to the insurer on the contract, including interest. The contract shall also include a statement of the basis for determining the date as of which the amount to cover such overdue payment and indebtedness shall be applied to produce the values under the contract arising therefrom;

6.3.3 a provision specifying the options available in the event of default in a periodic stipulated payment, which options may include an option to surrender the contract for a cash value as determined by the contract, and shall include an option to receive a paid-up annuity if the contract is not surrendered for cash, the amount of such paid-up annuity being determined by applying the value of the contract at the annuity commencement date in accordance with the terms of the contract.

6.3.4 Any individual variable contract delivered or issued for delivery in this State shall stipulate the expense, mortality and investment increment factors to be used in computing the dollar amount of variable benefits or other contractual payments or values thereunder. "Expense," as used in this subsection may exclude some or all taxes, if so stipulated in the contract or agreement.

6.4 In computing the dollar amount of variable benefits or other contractual payments or values under an individual variable contract:

6.4.1 The annual net investment increment assumption shall not exceed 5%, except with the approval of the Commissioner; and

6.4.2 To the extent that the level of benefits may be affected by future mortality results, the mortality factor shall be determined from the Annuity Mortality Table for 1949, Ultimate, or any modification of that table not having a higher mortality rate at any age, or, if approved by the Commissioner, from another table.

6.5 The reserve liability for variable contracts shall be established pursuant to the requirements of the standard valuation law as set forth in 18 Del.C. Ch. 13, in accordance with actuarial procedures that recognize the variable nature of the benefits provided.

6.6 In the sale of an individual variable contract, made in conjunction with the sale of either a life insurance policy or a fixed annuity contract, there shall be a disclosure to the prospective purchaser which shows the consideration to be paid for the variable contract separately from the other charges. If any benefits or non-forfeiture values which may accrue prior to the death of the insured are involved in the presentation of such a sale, the value of such life insurance policy or such fixed annuity must be shown separately from any other values.

6.7 Individual annuity contracts which provide for both fixed and variable dollar benefits (which are specified at the time of the sale of such contracts) shall show, separately, the consideration to be paid for the fixed dollar benefits and for the variable dollar benefits or the proportion of such consideration to be paid for each such benefit.

18 Del. Admin. Code § 1201-6.0