§ 3765. Calculation of adjusted premiums
(a)(1) This section shall not apply to policies issued on or after the operative date of
section 3768 of this subchapter. Except as provided in subsection (c) of this section,
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, excluding amounts stated in the policy as extra premiums to cover
impairments or special hazards, that the present value, at the date of issue of the
policy, of all such adjusted premiums shall be equal to the sum of:
(A) the then present value of the future guaranteed benefits provided for by the policy;
(B) two percent 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;
(C) 40 percent of the adjusted premium for the first policy year; and
(D) 25 percent 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, whichever is less.
(2) In applying the percentages specified in subdivisions (1)(C) and (D) of this subsection,
no adjusted premium shall be deemed to exceed four percent of the amount of insurance
or level amount equivalent. The date of issue of a policy for the purpose of this
section shall be the date as of which the rated age of the insured is determined.
(b) In the case of a policy providing an amount of insurance varying with duration of
the policy, the equivalent level amount for the purpose of this section shall be deemed
to be the level amount of insurance provided by an otherwise similar policy, containing
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.
(c)(1) The adjusted premiums for any policy providing term insurance benefits by rider or
supplemental policy provision shall be equal to:
(A) the adjusted premiums for an otherwise similar policy issued at the same age without
such term insurance benefits, increased, during the period for which premiums for
such term insurance benefits are payable; by
(B) the adjusted premiums for such term insurance.
(2) Subdivisions (1)(A) and (B) of this subsection shall be calculated separately except
that, for purposes of subdivisions (a)(1)(B)-(D) of this section, the amount of insurance
or equivalent uniform amount of insurance used in the calculation of the adjusted
premiums referred to in subdivision (a)(1)(B) of this section shall be equal to the
excess of the corresponding amount determined for the entire policy over the amount
used in the calculation of the adjusted premiums in subdivision (1) of this subsection
(c).
(d) Except as otherwise provided in sections 3766 and 3767 of this subchapter, all adjusted
premiums and present values referred to in this subchapter shall for all policies
of ordinary insurance be calculated on the basis of the Commissioners’ 1941 Standard
Ordinary Mortality Table, provided that for any category of ordinary insurance issued
on female risks, adjusted premiums and present values may be calculated according
to any age not more than three years younger than the actual age of the insured and
such calculations for all policies of industrial insurance shall be made on the basis
of the 1941 Standard Industrial Mortality Table. All calculations shall be made on
the basis of the rate of interest, not exceeding three and one-half percent per annum,
specified in the policy for calculating cash surrender values and paid-up nonforfeiture
benefits. Provided, however, that in calculating the present value of any paid-up
term insurance with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than 130 percent of the rates
of mortality according to the applicable table. Provided, further, that for insurance
issued on a substandard basis, the calculation of any 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 Commissioner. (Added 2015, No. 63, § 2, eff. June 17, 2015.)