Policies Providing Graded Death Benefits

PURPOSE: This rule provides notice to insurance applicants of all restrictions and limitations placed on life insurance policies which provide merely for return of premium accidental death benefits, or both, during early policy years. This rule was adopted pursuant to the provisions of section 374.045, RSMo and to implement section 376.675, RSMo. (1) Scope. (A) No life insurance policy providing graded death benefits during early policy years shall be approved by this department unless it complies with the standards set forth in this rule. No previously approved policy form of this type may be issued in this state by any insurer after December 26, 1974, unless the form complies with the standards set forth. Policies of this type— 1. Shall be offered on a guaranteedissued basis or on liberal underwriting standards which justify grading the death benefit during early policy years; 2. Shall provide accidental death benefits in an amount not less than the face amount of the policy during the graded death benefit period. This requirement shall not apply to those policies providing at least fifty percent (50%) of the ultimate face amount as a first-year death benefit; 3. Shall provide, in the application, notice of the graded death benefit during early policy years and, if applicable, notice of the accidental death benefit provided; 4. Shall contain, in the brief description appearing on the face page and back page of the policy, a statement clearly setting forth the graded death benefit feature and, if appropriate, the accidental death benefit provided; 5. Shall contain, on the face, a prominently displayed statement reading in substance: “Read Your Policy Carefully. If You Are Not Satisfied, Return the Policy Within Thirty (30) Days of Its Receipt For a Full Premium Refund.” Nothing shall prohibit a company from allowing more than thirty (30) days for return of a policy as long as the provision is in writing on the face page of the policy; 6. Shall not grade, with respect to issue ages up to and including age sixty-five (65), the death benefit in excess of three (3) years unless the policy provides at least fifty percent (50%) of the ultimate face amount as a first-year death benefit; 7. Shall not grade, with respect to issue ages sixty-six to seventy-five (66–75) inclusive, the death benefit in excess of two (2) years unless the policy provides at least fifty percent (50%) of the ultimate face amount as a first-year death benefit. The two (2)-year period can be extended to three (3) years if the death benefit during the third policy year equals or exceeds sixty-five percent (65%) of the face amount; and 8. Shall not be issued in this state at ages seventy-six (76) and above, unless the policy provides at least fifty percent (50%) of the ultimate face amount as a first-year death benefit. (B) Any notice required by this section may be imprinted or rubber stamped clearly and legibly in the proper place on the policy, application, or both. (C) With respect to the ages specified in paragraphs (1)(A)6.–8. of this rule, the ages may be increased by three (3) years for policies issued on female lives if the company uses a three (3)-year female age-setback in the calculation of rates and nonforfeiture values applicable to female insureds. (D) Any previously approved policy form which fully complies with the standards outlined in this rule, need not be revised and need not be resubmitted to this department for approval. (2) Exceptions. (A) This rule shall not apply— 1. To life insurance policies issued in connection with an employer-sponsored insurance, pension or profit-sharing plan, including plans which cover self-employed individuals and owner-employees; 2. Where reduced benefits during yearly policy years, primarily in Jumping Juvenile or Juvenile Estate policies, are an inherent feature of the plan of insurance; 3. To term insurance policies which automatically convert to a permanent plan of insurance for an increased amount at a specified age; and 4. To policies providing a gradation of death benefits applicable only for the period prior to attained age five (5). AUTHORITY: sections 374.045 and 376.675, RSMo 1986.* This rule was previously filed as 4 CSR 190-13.100. Original rule filed Sept. 18, 1974, effective Sept. 28, 1974. Amended: Filed July 13, 1976, effective Feb. 20, 1977. Amended: Filed Dec. 1, 1989, effective June 30, 1990. *Original authority: 374.045, RSMo 1967 and 376.675, RSMo 1963, amended 1984.