AS Title 21, Chapter 45: Life Insurance and Annuities

Chapter 45. Life Insurance and Annuities. Sec. 21.45.010. Applicability. This chapter applies only to contracts of life insurance and annuities, other than reinsurance, group life insurance, and group annuities. Sec. 21.45.020. Standards provisions required; return and refund. (a) A policy of life insurance, other than group and pure endowments with or without return of premiums or of premiums and interest, may not be delivered or issued for delivery in this state unless it contains in substance all of the applicable provisions required by AS 21.45.030 — 21.45.150. This section does not apply to annuity contracts or to a provision of a life insurance policy, or contract supplemental to it, relating to health insurance benefits or to additional benefits in the event of death by accident or accidental means. (b) The provisions or portions of provisions not applicable to single premium or term policies may not to that extent be incorporated in the policy. (c) A life insurance policy or annuity contract delivered or issued for delivery in this state and each life insurance policy or annuity contract application must contain a notice prominently printed on or attached to the first page stating (1) on written request, an insurer is required to provide, within a reasonable time, reasonable factual information regarding the benefits and provisions of the policy or contract to the policy or contract holder; and (2) if, for any reason, the policy or contract holder is not satisfied with the policy or contract, the policy or contract holder may return the policy or contract within 10 days after the policy or contract is delivered and, except as provided in (d) of this section, receive a refund of all money paid. (d) For a variable life insurance policy or variable annuity contract, the refund under (c) of this section must equal the sum of (1) the difference between the premiums paid, including any policy or contract fees or other charges and the amounts allocated to any separate accounts under the policy or contract; and (2) the value of amounts allocated to any separate accounts on the date the returned policy is received by the insurer or its insurance producer. Sec. 21.45.030. Grace period. There shall be a provision that a grace period of 30 days, or, at the option of the insurer, of one month of not less than 30 days, or of four weeks in the case of industrial life insurance policies the premiums for which are payable more frequently than monthly, is allowed within which the payment of each premium after the first premium may be made, during which period of grace the policy shall continue in full force. If a claim arises under the policy during the period of grace the amount of the premium due or overdue may be deducted from the policy proceeds. Sec. 21.45.040. Incontestability. There shall be a provision that the policy, exclusive of provisions relating to health insurance benefits or to additional benefits in the event of death by accident or accidental means and except for nonpayment of premiums, is uncontestable after it has been in force during the lifetime of the insured for a period of two years from its date of issue. Sec. 21.45.050. Entire contract. There shall be a provision that the policy, or the policy and the policy application if a copy of the application is endorsed upon or attached to the policy when issued, constitute the entire contract between the parties, and if the application is made a part of the policy, that all statements contained in the application shall, in the absence of fraud, be considered representations and not warranties. Sec. 21.45.060. Misstatement of age. Except as provided in AS 21.45.210 , there shall be a provision that if the age of the insured or of another person whose age is considered in determining the premium or benefit has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium would have purchased at the correct age or ages. Sec. 21.45.070. Dividends. (a) Except as provided in AS 21.45.220 , there shall be a provision in participating policies that, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy if the policy is in force and all premiums to that date are paid. Except as hereinafter provided, any dividend becoming payable shall, at the option of the party entitled to elect the option, be either (1) payable in cash; or (2) applied to one of the other dividend options that may be provided by the policy; if any other dividend option is provided, the policy must further state which options shall be automatically effective when the party does not elect another option; if the policy specifies a period within which the other dividend option may be elected, the period may not be less than 30 days following the date on which the dividend is due and payable; the annually apportioned dividend shall be payable in cash even though the policy provides that payment of the dividend is to be deferred for a specified period if the period does not exceed six years from the date of apportionment and that interest will be added to the dividend at a specified rate; if a participating policy provides that the benefit under a paid-up nonforfeiture provision is to be participating, it may provide that any divisible surplus becoming payable or apportioned while the insurance is in force under the nonforfeiture provision shall be applied in the manner set out in the policy. (b) In participating industrial life insurance policies, in lieu of the provision required in (a) of this section, there shall be a provision that, beginning not later than the end of the fifth policy year, the policy shall participate annually in the divisible surplus, if any, in the manner set out in the policy. Sec. 21.45.080. Policy loan. (a) There shall be a provision that after three full years' premiums have been paid and after the policy has a cash surrender value and while no premium is in default beyond the grace period for payment, the insurer will advance, on proper assignment or pledge of the policy and on the sole security of the policy, at a specified rate of interest not exceeding eight percent a year, an amount equal to or, at the option of the party entitled to it, less than the loan value of the policy. The director may authorize rates of interest in excess of six percent only on a finding that the holders of policies will benefit from the increased earnings of the insurer resulting from the higher rates, through the use of higher dividends or lower premiums, or both. The loan value of the policy shall be at least equal to the cash surrender value at the end of the then current policy year, except that the insurer may deduct, either from the loan value or from the proceeds of the loan, an existing indebtedness not already deducted in determining the cash surrender value including interest then accrued but not due, the unpaid balance of the premium for the current policy year, and interest on the loan to the end of the current policy year. The policy may also provide that if interest on an indebtedness is not paid when due it shall then be added to the existing indebtedness and shall bear interest at the same rate, and that if and when the total indebtedness on the policy, including interest due or accrued, equals or exceeds the amount of the loan value of the policy, the policy shall terminate and become void. The policy must reserve to the insurer the right to defer the granting of a loan, other than for the payment of a premium to the insurer, for six months after the date of the loan application. The policy, at the insurer's option, may provide for automatic premium loan, subject to an election of the party entitled to elect. Except as provided in (e) of this section, the required interest rates on policy loans set out in this section apply only to policies issued before July 1, 1982. (b) This section does not apply to term policies or to term insurance benefits provided by rider or supplemental policy provisions, or to industrial life insurance policies. (c) A policy issued on or after July 1, 1982, must have a provision specifying an interest rate on a policy loan not to exceed eight percent a year, or a provision permitting an adjustable maximum interest rate established under this subsection. An adjustable maximum rate of interest on a policy loan determined under this subsection may not exceed the higher of the published monthly average for the calendar month ending two months before the date on which the rate is determined, or the rate used to compute cash surrender values under the policy during the applicable period plus one-twelfth of a percentage point multiplied by the number of months in the applicable period. If an adjustable maximum rate of interest is used in a policy under this subsection, the policy must contain a provision that states times for the adjustment of the interest rate for that policy. Adjustment shall occur at least once every 12 months, but not more often than once every three months. The interest rate being charged may be increased if the published monthly average increases by one-half percent or more and the interest rate being charged must be reduced if the published monthly average decreases by one-half percent or more. A life insurer shall (1) notify the policyholder of the initial rate of interest on the loan at the time a cash loan is made; (2) notify a policyholder who obtains a premium loan of the initial rate of interest on the loan as soon as it is reasonably possible to do so after making an initial premium loan; except as provided in (3) of this subsection, notice does not have to be given to the policyholder when a second or subsequent premium loan is added; (3) send reasonable advance notice of any increase in the rate to a policyholder who has a policy loan; and (4) include other relevant information on adjustment of interest rates in a notice required under this subsection. The loan value of the policy shall be determined in accordance with (a) of this section. A policy may not be terminated in a policy year as the sole result of a change in the interest rate during that policy year. If an interest rate changes, the insurer shall maintain coverage during the policy year until the date on which the policy would have terminated if the interest rate had not changed. (d) In (c) of this section (1) “interest rate” includes a rate of interest charged for reinstatement of policy loans for the period during and after the lapse of a policy; (2) “policy” includes certificates issued by a fraternal benefit society and annuity contracts that provide for policy loans; (3) “policy loan” includes a premium loan made under a policy to pay a premium that was not paid to the life insurer as it became due; (4) “policyholder” includes an owner of a policy or a person designated to pay policy premiums according to the records of the life insurer; (5) “published monthly average” means the monthly average of corporate bond yields as published by Moody's Investor Service, Inc., or its successor, or if Moody's corporate bond yield average-monthly average corporates is not published, a substantially similar average, established by regulation adopted by the director. (e) The provisions of (c) of this section on interest rates apply only to policy loans made on policies issued on or after July 1, 1982, except that if a policyholder agrees in writing to the applicability of (c) of this section to a policy issued before July 1, 1982, that subsection applies to policy loans made on that policy. Sec. 21.45.090. Table of values. There shall be a table showing in figures the loan value, if required under AS 21.45.080 , and the cash surrender values and nonforfeiture benefits in accordance with AS 21.45.300 (b)(5), either during the first 20 policy years or during the term of the policy, whichever is shorter. Sec. 21.45.100. Table of installments. In case the policy provides that the proceeds may be payable in installments which are determinable at issue of the policy, there shall be a table showing the amounts of the guaranteed installments. Sec. 21.45.110. Reinstatement. Except as provided in AS 21.45.230 , there shall be a provision that unless (1) the policy has been surrendered for its cash surrender value, (2) its cash surrender value has been exhausted, or (3) the paid-up term insurance, if any, has expired, the policy will be reinstated at any time within three years, or two years in the case of industrial life insurance policies, from the date of premium default upon written application, the production of evidence of insurability satisfactory to the insurer, the payment of all premiums in arrears with interest at a rate not exceeding six percent a year compounded annually, and the payment or reinstatement of interest due to the insurer on a loan on the policy with interest as provided in AS 21.45.080 (c). Sec. 21.45.120. Payment of premiums. There shall be a provision relative to the payment of premiums. Sec. 21.45.130. Payment of claims. There shall be a provision that when a policy becomes a claim by the death of the insured, settlement shall be made upon receipt of due proof of death and, at the insurer's option, surrender of the policy, proof of the interest of the claimant, or both. If an insurer specifies a particular period before the expiration of which settlement shall be made, the period may not exceed two months from the receipt of the proofs. Sec. 21.45.140. Beneficiary, industrial policies. An industrial life insurance policy must have the name of the beneficiary designated on it with a reservation of the right to designate or change the beneficiary after the issuance of the policy. The policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, and that the insurer may refuse to endorse the name of proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. The policy may also provide that if the beneficiary designated in the policy does not make a claim under the policy or does not surrender the policy with due proof of death within the period stated in the policy, which may not be less than 30 days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give a valid release, the insurer may pay the proceeds to the executor or administrator of the insured, or to any relative of the insured by blood or legal adoption or connection by marriage, or to any person appearing to the insurer to be equitably entitled to the proceeds by reason of having been named beneficiary, or by reason of having incurred expense for the maintenance, medical attention, or burial of the insured. The policy may also include a similar provision applicable to other payments due under the policy. Sec. 21.45.150. Title. There shall be a title on the policy, briefly describing it. Sec. 21.45.160. Excluded or restricted coverage. A clause in a policy of life insurance stating that the policy shall be incontestable after a specified period precludes only a contest of the validity of the policy and does not preclude the assertion at any time of defenses based upon provisions in the policy that exclude or restrict coverage, whether or not the restrictions or exclusions are excepted in such clause. Sec. 21.45.170. Standard provisions: annuity and pure endowment contracts. (a) An annuity or pure endowment contract, other than a reversionary annuity, survivorship annuity, or group annuity, may not be delivered or issued for delivery in this state unless it contains in substance each of the provisions specified in AS 21.45.180 — 21.45.230, except that if a provision is not applicable to single premium annuities or single premium pure endowment contracts it may not be incorporated into the contract. (b) This section does not apply to contracts for deferred annuities included in or upon the lives of beneficiaries under, life insurance policies. Sec. 21.45.180. Grace period: annuities. In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision for a grace period of one month, but not less than 30 days, within which a stipulated payment other than the first one may be made, subject at the option of the insurer to make an interest charge on the late payment at a rate to be specified in the contract, but not exceeding six percent a year, for the number of days of grace elapsing before the payment, during which period of grace the contract shall continue in full force, but in case a claim arises under the contract on account of death before expiration of the period of grace before the overdue payment to the insurer or the deferred payments of the current contract year, if any, are made, the amount of the payments, with interest on any overdue payments, may be deducted from the amount payable under the contract in settlement. Sec. 21.45.190. Incontestability: annuities. Except as provided in AS 21.45.210 , if any statements, other than those relating to age, sex, and identity are required as a condition to issuing an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the contract is incontestable after it has been in force during the lifetime of the person or of each of the persons as to whom the statements are required, for a period of two years from its date of issue, except for nonpayment of stipulated payments to the insurer; and at the option of the insurer the contract may also except provisions relative to benefits in the event of disability and provisions that grant insurance specifically against death by accident or accidental means. Sec. 21.45.200. Entire contract. In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the contract constitutes the entire contract between the parties or, if a copy of the application is endorsed upon or attached to the contract when issued, there shall be a provision that the contract and the application constitute the entire contract between the parties. Sec. 21.45.210. Misstatement of age or sex: annuities. In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that if the age or sex of the person or persons upon whose life or lives the contract is made, or of any of them, has been misstated, the amount payable or benefits accruing under the contract shall be such as the stipulated payment or payments to the insurer would have purchased according to the correct age or sex and that if the insurer makes or has made an overpayment or overpayments on account of a misstatement, the amount of the overpayment, with interest at the rate to be specified in the contract but not exceeding six percent a year, may be charged against the current or next succeeding payment or payments to be made by the insurer under the contract. Sec. 21.45.220. Dividends: annuities. If an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, is participating, there shall be a provision that the insurer shall annually ascertain and apportion any divisible surplus accruing on the contract. Sec. 21.45.230. Reinstatement: annuities. In an annuity or pure endowment contract, other than a reversionary, survivorship, or group annuity, there shall be a provision that the contract may be reinstated at any time within one year from the default in making stipulated payments to the insurer, unless the cash surrender value had been paid, if all overdue stipulated payments and any indebtedness to the insurer on the contract are paid or reinstated with interest at a rate to be specified in the contract, not exceeding six percent a year payable annually. Where applicable the insurer may also include a requirement of evidence of insurability satisfactory to the insurer. Sec. 21.45.240. Standard provisions: reversionary annuities. (a) Except as stated herein, a contract for a reversionary annuity may not be delivered or issued for delivery in this state unless it contains in substance each of the following provisions: (1) those provisions specified in AS 21.45.180 — 21.45.220, except that under AS 21.45.180 the insurer may at its option provide for an equitable reduction of the amount of the annuity payments in settlement of an overdue payment in lieu of providing for deduction of the payments from an amount payable upon settlement under the contract; (2) a provision that the contract may be reinstated at any time within three years from the date of default in making stipulated payments to the insurer, upon production of evidence of insurability satisfactory to the insurer, and upon condition that all overdue payments and any indebtedness to the insurer on account of the contract be paid, or, within the limits permitted by the then cash values of the contract, reinstated, with interest as to both payments and indebtedness at a rate to be specified in the contract but not exceeding six percent a year compounded annually. (b) This section does not apply to group annuities or to annuities included in life insurance policies, and any of the provisions not applicable to single premium annuities shall not to that extent be incorporated into the policy or contract. Sec. 21.45.250. Limitation of liability. (a) A policy of life insurance may not be delivered or issued for delivery in this state if it contains a provision (1) for a period shorter than that provided by statute within which an action at law or in equity may be commenced on the policy; or (2) that excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status, except that a policy may contain provisions excluding or restricting coverage as specified therein in the event of death (A) as a result, directly or indirectly, of war, declared or undeclared, or of action by military forces, or of any act or hazard of the war or action, or of service in the military, naval, or air forces or in civilian forces auxiliary thereto, or from any cause while a member of the military, naval, or air forces of any country at war, declared or undeclared, or of any country engaged in military action; (B) as a result of aviation or any air travel or flight; (C) as a result of a specified hazardous occupation or occupations; (D) while the insured is a resident outside the United States and Canada; or (E) within two years from the date of issue of the policy as a result of suicide, while sane or insane. (b) A policy that contains an exclusion or restriction under (a) of this section must also provide that in the event of death under the circumstances to which an exclusion or restriction is applicable, the insurer will pay an amount not less than a reserve determined according to the commissioner's Reserve Valuation Method upon the basis of the mortality table and interest rate specified in the policy for the calculation of nonforfeiture benefits (or if the policy provides for no such benefits, computed according to a mortality table and interest rate determined by the insurer and either specified in the policy or filed with the director) with adjustment for indebtedness or dividend credit. (c) This section does not apply to industrial life insurance, group life insurance, health insurance, reinsurance, or annuities, or to a provision in a life insurance policy relating to health benefits or to additional benefits in the event of death by accident or accidental means. (d) Nothing contained in this section prohibits a provision that in the opinion of the director is more favorable to the policyholder than a provision permitted by this section. Sec. 21.45.260. Prohibited provisions: industrial life insurance. A policy of industrial life insurance may not contain a provision (1) by which the insurer may deny liability under the policy for the reason that the insured has previously obtained other insurance from the same insurer; (2) giving the insurer the right to declare the policy void on the grounds that the insured has had a disease or ailment, whether specified or not, or that the insured has received institutional, hospital, medical, or surgical treatment or attention, except the policy may contain a provision that gives the insurer the right to declare the policy void if the insured has, within two years before the issuance of the policy, received institutional, hospital, medical, or surgical treatment or attention and the insured or claimant under the policy fails to show that the condition occasioning the treatment or attention was not of a serious nature or was not material to the risk; (3) giving the insurer the right to declare the policy void because the insured has been rejected for insurance by another insurer, unless the right is conditioned upon a showing by the insurer that knowledge of the rejection would have led to a refusal by the insurer to make the contract. Sec. 21.45.270. Incontestability, limitation of liability after reinstatement. (a) A reinstated policy of life insurance or annuity contract may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement and with the same conditions and exceptions as the policy provides with respect to contestability after original issuance. (b) When a life insurance policy or annuity contract is reinstated, the reinstated policy or contract may exclude or restrict liability to the same extent that the liability might have been or was excluded or restricted when the policy or contract was originally issued, and the exclusion or restriction shall be effective from the date of reinstatement. Sec. 21.45.280. Policy settlements. A life insurer shall have the power to hold under agreement the proceeds of any policy issued by it, upon the terms and restrictions as to revocation by the policyholder and control by beneficiaries, and with the exemptions from the claims of creditors of beneficiaries other than the policyholder as set out in the policy or as agreed to in writing by the insurer and the policyholder. Upon maturity of a policy, in the event the policyholder has made no such agreement, the insurer shall have the power to hold the proceeds of the policy under an agreement with the beneficiaries. The insurer shall not be required to segregate the funds so held but may hold them as part of its general assets. Sec. 21.45.290. Indebtedness deducted from proceeds. In determining the amount due under a life insurance policy, whether issued before or after July 1, 1966, deduction may be made of (1) unpaid premiums or installments for the current policy year due under the terms of the policy; and of (2) the amount of principal and accrued interest of a policy loan or other indebtedness against the policy then remaining unpaid. Sec. 21.45.300. Standard nonforfeiture law for life insurance. (a) This section shall be known as the standard nonforfeiture law for life insurance. (b) In the case of policies issued on and after the operative date of this section as defined in (cc) of this section a policy of life insurance, except as stated in (aa) of this section, may not be delivered or issued for delivery in this state unless it contains the following provisions, or corresponding provisions that in the opinion of the director are at least as favorable to the defaulting or surrendering policyholder as are the minimum requirements specified in this section and are essentially in compliance with (z) of this section: (1) that, in the event of default in a premium payment, after premiums have been paid for at least one full year, the insurer will grant, upon proper request not later than 60 days after the due date of the premium in default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of the due date, of the amount as may be specified in this section; (2) that, upon surrender of the policy within 60 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 and five full years in the case of industrial insurance, the insurer will pay, instead of a paid-up nonforfeiture benefit, a cash surrender value of the amount specified; (3) that a specified paid-up nonforfeiture benefit shall become effective as specified in the policy unless the person entitled to make the election elects another available option not later than 60 days after the due date of the premium in default; (4) that if the policy shall have become paid up by completion of premium payments, or if it is continued under a paid-up nonforfeiture benefit which became 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 insurer will pay, upon surrender of the policy within 30 days after any policy anniversary, a cash surrender value of the amount specified; (5) in the case of all other policies, a statement of the mortality table and interest rate used in calculating the cash surrender values and the paid-up nonforfeiture benefits available under the policy, together with a table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if any, available under the policy on each policy anniversary, either during the first 20 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 insurer on the policy; (6) a statement that the cash surrender values and the paid-up nonforfeiture benefits available under the policy are not less than the minimum values and benefits required by or under the insurance law of this state; an explanation of the manner in which the cash surrender values and the paid-up nonforfeiture benefits are altered by the existence of any paid-up additions credited to the policy or any indebtedness to the insurer on the policy; or if a detailed statement of the method of computation of the values and benefits shown in the policy is not stated in the policy, a statement that the method of computation has been filed with the insurance supervisory official of the state in which the policy is delivered; and a statement of the method to be used in calculating the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary beyond the last anniversary for which the values and benefits are consecutively shown in the policy; (7) that instead of a stipulated paid-up nonforfeiture benefit as described in (1) of this subsection, the insurer may substitute, upon proper request not later than 60 days after the due date of the premium in default, an actuarially equivalent alternative paid-up nonforfeiture benefit that provides a greater amount or longer period of death benefits or, if applicable, a greater amount of earlier payment of endowment benefits; (8) in the case of a policy which causes on a basis guaranteed in the policy an unscheduled change in benefits or premiums or which provides an option for a change in benefits or premiums other than a change to a new policy, a statement of the mortality table, interest rate, and method used in calculating cash surrender values and the paid-up nonforfeiture benefits available under the policy. (c) Any of the provisions or portions of provisions set out in (b) of this section that are not applicable by reason of the plan of insurance may, to the extent inapplicable, be omitted from the policy. The insurer shall reserve the right to defer the payment of a cash surrender value for a period of six months after demand has been made on the policy surrendered. (d) A cash surrender value available under the policy in the event of default in a premium payment due on any policy anniversary, whether or not required by (b) of this section, shall be an amount not less than the excess, if any, of the present value on the anniversary of the future guaranteed benefits which would have been provided for by the policy, including any existing paid-up additions, if there has been no default, over the sum of (1) the then present value of the adjusted premiums as defined in (h) — (w) of this section, corresponding to premiums that would have fallen on and after the anniversary; and (2) the amount of any indebtedness to the insurer on account of or secured by the policy. (e) Notwithstanding (d) of this section, if a policy issued on or after the operative date of (w) of this section provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium by rider supplemental policy provision, the cash surrender value referred to in (d) of this section shall be an amount not less than the sum of the cash surrender value as defined in (d) of this section for an otherwise similar policy issued at the same age without the same rider or supplemental policy provision and the cash surrender value as defined in (d) of this section for a policy which provides only the benefits otherwise provided by the rider or supplemental policy provision. (f) Notwithstanding (d) of this section, if a family policy issued on or after April 7, 1984, defines a primary insured and provides term insurance on the life of the spouse of the primary insured expiring before the spouse is age 71, the cash surrender value referred to in (d) of this section shall be an amount not less than the cash surrender value as defined in (d) of this section for an otherwise similar policy issued at the same age without the term insurance on the life of the spouse and the cash surrender value as defined in (d) for a policy which provides only the benefits otherwise provided by the term insurance on the life of the spouse. A cash surrender value available within 30 days after any anniversary under a policy paid-up by completion of all premium payments, or a policy continued under any paid-up nonforfeiture benefits whether or not required by (b) of this section, shall be an amount not less than the present value, on the anniversary, of the future guaranteed benefits provided for by the policy, including any existing paid-up additions, decreased by any indebtedness to the insurer on account of or secured by the policy. (g) A paid-up nonforfeiture benefit available under the policy in the event of default in the premium payment due on any policy anniversary shall be such that its present value as of the anniversary shall be at least equal to the cash surrender value provided for by the policy or, if none is provided for, that cash surrender value which would have been required by this section in the absence of the conditions that premiums shall have been paid for at least a specified period. (h) Except as provided in (j) of this section, the adjusted premiums for a policy shall be calculated on an annual basis and shall be the uniform percentage of the respective premiums specified in the policy for each policy year, excluding extra premiums on a substandard policy that the present value, at the date of issue of the policy, of all the adjusted premiums shall be equal to the sum of (1) the then present value of the future guaranteed benefits provided for by the policy; (2) two percent of the amount of the insurance, if the insurance is uniform in amount, or of the equivalent uniform amount, as defined, if the amount of insurance varies with the duration of the policy; (3) 40 percent of the adjusted premiums for the first policy year; (4) 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, except that in applying the percentage specified in (3) and (4) of this subsection no adjusted premiums shall be considered to exceed four percent of the amount of insurance or uniform amount equivalent thereto. Whenever the plan or term of a policy has been changed, either by request of the insured or automatically in accordance with the provisions of the policy, the date of inception of the changed policy for the purposes of determining a nonforfeiture benefit or cash surrender value shall be the date as of which the age of the insured is determined for the purposes of the changed policy. The date of issue of a policy for the purposes of this section shall be the date on which the rated age of the insured is determined. This subsection does not apply to policies issued on or after the operative date of (w) of this section. (i) If a policy provides an amount of insurance that varies with the duration of the policy, the equivalent uniform amount of insurance for the purpose of (h) of this section shall be considered to be the uniform 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 the duration and the benefit under which have the same present value at the date of issue as the benefits under the policy, except that in the case of a policy a varying amount of insurance issued on the life of a child under age 10, the equivalent uniform amount may be computed as though the amount of insurance provided by the policy before the attainment of age 10 were the amount provided by the policy at age 10. (j) The adjusted premiums for a policy which provides term insurance benefits by rider or supplemental policy provision shall be equal to (1) the adjusted premiums for an otherwise similar policy issued at the same age without the term insurance benefits, increased during the period for which premiums for the term insurance benefits are payable, by (2) the adjusted premiums for the term insurance, the foregoing items (1) and (2) being calculated separately in accordance with (h) and (i) of this section, except that, for the purposes of (h)(2), (3) and (4) of this section, the amount of insurance of equivalent uniform amount of insurance used in the calculation of the adjusted premiums referred to in (2) of this subsection 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 (1) of this subsection. (k) All adjusted premiums and present values referred to in this section shall for all policies of ordinary insurance be calculated on the basis of the Commissioner's 1958 Standard Ordinary Mortality Table, except that for any category or ordinary insurance issued on female risks, adjusted premiums and present values may be calculated according to an age not more than six years younger than the actual age of the insured. Except as provided in (l) of this section, the 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 specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits. The rate of interest specified in the policy may not exceed three and one-half percent a year except that (1) a rate of interest not exceeding five and one-half percent a year may be used for policies issued on or after July 1, 1978, and (2) a rate of interest not exceeding six and one-half percent a year may be used for a single premium whole life or endowment insurance policy. In calculating the present value of paid-up term insurance with accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed in the case of a policy of ordinary insurance, may be not more than those shown in the Commissioner's 1958 Extended Term Insurance Table. In the case of a policy of industrial insurance, the rates of mortality may be not more than 130 percent of the rates of mortality according to the 1941 Standard Industrial Mortality Table. The calculation of the adjusted premiums and present values for insurance issued on a substandard basis may be based on another table of mortality as may be specified by the insurer and approved by the director. This subsection does not apply to policies issued on or after the operative date of (w) of this section. (l) In case of industrial policies issued on or after January 1, 1970, the adjusted premiums and present values referred to in this section shall be calculated on the basis of the Commissioner's 1961 Standard Industrial Mortality Table and the rate of interest specified in the policy for calculating cash surrender values and paid-up nonforfeiture benefits, however, that specified the rate of interest specified in the policy may not exceed three and one-half percent a year except that (1) a rate of interest not exceeding five and one-half percent a year may be used for policies issued on or after July 1, 1978; and (2) a rate of interest not exceeding six and one-half percent a year may be used for a single premium whole life or endowment insurance policy. In calculating the present value of 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 those shown in the Commissioner's 1961 Industrial Extended Term Insurance Table. The calculation of the adjusted premiums and present values for insurance issued on a substandard basis may be based on a table of mortality specified by the insurer and approved by the director. This subsection does not apply to policies issued on or after the operative date of (w) of this section. (m) Except as provided in (s) of this section, the adjusted premiums for a policy shall be calculated on an annual basis and shall be a uniform percentage of the respective premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments or special hazards and also excluding a uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the date of issue of the policy, of all adjusted premiums shall be equal to the sum of (1) the then present value of the future guaranteed benefits provided for by the policy; (2) one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and (3) 125 percent of the nonforfeiture net level premium as defined in (n) — (t) of this section. In applying the percentage specified in (3) of this subsection a nonforfeiture net level premium may not exceed four percent of either the amount of insurance, if the insurance is uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years. 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. This subsection applies to all policies issued after the operative date of (w) of this section. (n) The nonforfeiture net level premium shall be equal to the present value, at the date of issue of the policy, of the guaranteed benefits provided for by the policy divided by the present value, at the date of issue of the policy, of an annuity of one a year payable on the date of issue of the policy and on each anniversary of the policy on which a premium falls due. This subsection applies to all policies issued after the operative date of (w) of this section. (o) In the case of policies which cause on a basis guaranteed in the policy unscheduled changes in benefits or premiums or which provide an option for changes in benefits or premiums other than a change to a new policy, the adjusted premiums and present values shall initially be calculated on the assumption that future benefits and premiums do not change from those stipulated at the date of issue of the policy. At the time of a change in the benefits or premiums the future adjusted premiums, nonforfeiture net level premiums, and present values shall be recalculated on the assumption that future benefits and premiums do not change from those stipulated by the policy immediately after the change. This subsection applies to all policies issued after the operative date of (w) of this section. (p) Except as provided in (s) of this section, the recalculated future adjusted premiums for a policy shall be a uniform percentage of the respective future premiums specified in the policy for each policy year, excluding amounts payable as extra premiums to cover impairments and special hazards, and also excluding any uniform annual contract charge or policy fee specified in the policy in a statement of the method to be used in calculating the cash surrender values and paid-up nonforfeiture benefits, that the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums shall be equal to the excess of (1) the sum of (A) the then present value of the then future guaranteed benefits provided for by the policy; and (B) the additional expense allowance, if any; over (2) the then cash surrender value if any, or present value of any paid-up nonforfeiture benefit under the policy. This subsection applies to all policies issued after the operative date of (w) of this section. (q) The additional expense allowance, at the time of the change to the newly defined benefits or premiums, shall be the sum of (1) one percent of the excess, if positive, of the average amount of insurance at the beginning of each of the first 10 policy years after the change over the average amount of insurance before the change at the beginning of each of the first 10 policy years after the time of the most recent previous change, or, if there has been no previous change, the date of issue of the policy; and (2) 125 percent of the increase, if positive, in the nonforfeiture net level premium. This subsection applies to all policies issued after the operative date of (w) of this section. (r) The recalculated nonforfeiture net level premium shall be equal to the result obtained by dividing (1) by (2) where (1) equals the sum of (A) the nonforfeiture net level premium applicable before the change times the present value of an annuity of one a year payable on each anniversary of the policy on or subsequent to the date of the change on which a premium would have fallen due had the change not occurred; and (B) the present value of the increase in future guaranteed benefits provided for by the policy; and (2) equals the present value of an annuity of one a year payable on each anniversary of the policy on or subsequent to the date of change on which a premium falls due. This subsection applies to all policies issued after the operative date of (w) of this section.

(s) Notwithstanding (m) — (q) of this section, in the case of a policy issued on a substandard basis which provides reduced graded amounts of insurance so that, in each policy year, the policy has the same tabular mortality cost as an otherwise similar policy issued on the standard basis which provides higher uniform amounts of insurance, the adjusted premiums and present values may be calculated as if it were issued to provide those higher uniform amounts of insurance on the standard basis. This subsection applies to all policies issued after the operative date of (w) of this section. (t) The adjusted premiums and present values for a policy of ordinary insurance referred to in this section shall be calculated on the basis of the Commissioners 1980 Standard Ordinary Mortality Table or, at the election of the insurer for any one or more specified plans of life insurance, the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors. The adjusted premiums and present values for a policy of industrial insurance shall be calculated on the basis of the Commissioners 1961 Standard Industrial Mortality Table. The adjusted premiums and present values for a policy issued in a particular calendar year shall be calculated on the basis of a rate of interest not exceeding the nonforfeiture interest rate as defined in this subsection for policies issued in that calendar year. However, (1) at the option of the insurer, calculations for all policies issued in a particular calendar year may be made on the basis of a rate of interest not exceeding the nonforfeiture interest rate, as defined in this subsection, for policies issued in the immediately preceding calendar year; (2) under a paid-up nonforfeiture benefit, including a paid-up dividend addition, a cash surrender value available, shall be calculated on the basis of the mortality table and rate of interest used in determining the amount of the paid-up nonforfeiture benefit and paid-up dividend additions, if any; (3) an insurer may calculate the amount of a guaranteed paid-up nonforfeiture benefit, including any paid-up addition under the policy, on the basis of an interest rate not less than that specified in the policy for calculating cash surrender values; (4) in calculating the present value of paid-up term insurance with accompanying pure endowment, if any, offered as nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in the Commissioners Extended Term Insurance Table for policies of ordinary insurance and not more than the Commissioners 1961 Industrial Extended Term Insurance Table for policies of industrial insurance; (5) for insurance issued on a substandard basis, the calculations of adjusted premiums and present values may be based on appropriate modifications mentioned above; (6) for policies issued before the operative date of the valuation manual, a Commissioners Standard Ordinary Mortality Table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation adopted by the director for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table; for policies issued on or after the operative date of the valuation manual, the valuation manual must provide the Commissioners Standard Ordinary Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1980 Standard Ordinary Mortality Table with or without the Ten-Year Select Mortality Factors or for the Commissioners 1980 Extended Term Insurance Table; if the director approves by regulation a Commissioners Standard Ordinary Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual, that minimum nonforfeiture standard supersedes the minimum nonforfeiture provided by the valuation manual; (7) for policies issued before the operative date of the valuation manual, a Commissioners Standard Industrial Mortality Table, adopted after 1980 by the National Association of Insurance Commissioners, that is approved by regulation adopted by the director for use in determining the minimum nonforfeiture standard may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Industrial Extended Term Insurance Table; for policies issued on or after the operative date of the valuation manual, the valuation manual must provide the Commissioners Standard Ordinary Mortality Table for use in determining the minimum nonforfeiture standard that may be substituted for the Commissioners 1961 Standard Industrial Mortality Table or the Commissioners 1961 Extended Term Insurance Table; if the director approves by regulation a Commissioners Standard Industrial Mortality Table adopted by the National Association of Insurance Commissioners for use in determining the minimum nonforfeiture standard for policies issued on or after the operative date of the valuation manual, that minimum nonforfeiture standard supersedes the minimum nonforfeiture provided by the valuation manual. (u) For a policy issued before the operative date of the valuation manual, the nonforfeiture annual interest rate for a policy issued in a particular calendar year shall be equal to 125 percent of the calendar year statutory valuation interest rate for the policy as defined in the Standard Valuation Law, rounded to the nearer one quarter of one percent, if the nonforfeiture interest rate is not less than four percent; for a policy issued on or after the operative date of the valuation manual, the nonforfeiture annual interest rate for a policy issued in a particular calendar year is provided by the valuation manual. (v) Notwithstanding any other provision in this title, a refiling of nonforfeiture values or their methods of computation for a previously approved policy form which involves only a change in the interest rate or mortality table used to compute nonforfeiture values shall not require refiling of any other provision of that policy form. This subsection applies to all policies issued after the operative date of (w) of this section. (w) An insurer may file with the director a written notice of its election to comply with the provisions of this subsection after a specified date before January 1, 1989. That date shall be the operative date of this subsection for the insurer. If an insurer makes no election, the operative date of this subsection for the insurer shall be January 1, 1989. (x) In the case of a plan of life insurance which provides for future premium determination, the amounts of which are to be determined by the insurer based on then estimates of future experience, or in the case of any plan of life insurance which is of such a nature than minimum values cannot be determined by the methods described in subsections (b) — (k) or (m) of this section, (1) the director must be satisfied that the benefits provided under the plan are substantially as favorable to policyholders and insured as the minimum benefits otherwise required by subsections (b) — (w) of this section; (2) the director must be satisfied that the benefits and pattern of premiums of the plan do not mislead prospective policyholders or insureds; (3) the cash surrender values and paid-up nonforfeiture benefits provided by the plan must not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this Standard Nonforfeiture Law for Life Insurance, as determined by regulations adopted by the director. (y) A cash surrender value and a paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment due at any time other than on the policy anniversary 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 (b) — (w) of this section may be calculated upon the assumption that a 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 amounts used to provide the additions. Notwithstanding the provisions of (d) of this section, certain additional benefits and premiums for those additional benefits, shall be disregarded in ascertaining cash surrender values and nonforfeiture benefits required by this section, and no additional benefits shall be required to be included in any paid-up nonforfeiture benefits. The benefits to be disregarded are those paid (1) in the event of death or dismemberment by accident or accidental means; (2) in the event of total and permanent disability; (3) as a reversionary annuity or deferred reversionary annuity benefits; (4) as term insurance benefits provided by a rider or supplemental policy provision to which, if issued as a separate policy, this section would not apply; (5) as term insurance on the life of a child or on the lives of children provided in a policy on the life of a parent of the child, if the term insurance expires before the child's age is 26, is uniform in amount after the child's age is one, and has not become paid-up by reason of the death of a parent of the child; and (6) as other policy benefits additional to life insurance and endowment benefits. (z) This subsection, in addition to all other applicable subsections of this section, shall apply to all policies issued on or after January 1, 1987. The cash surrender value available under the policy in the event of default in a premium payment due on a policy anniversary shall be in an amount which does not differ by more than two-tenths of one percent of either the amount of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years, from the sum of the greater of zero and the basic cash value hereinafter specified and the present value of any existing paid-up additions less the amount of any indebtedness of the insurer under the policy. The basic cash value shall be equal to the present value on the policy anniversary of the future guaranteed benefits which would have been provided for by the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the insurer if there had been no default, less the then present value of the nonforfeiture factors as defined in this subsection, corresponding to the premiums which would have fallen due on and after the policy anniversary. Provided, however, that the effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage as described in subsection (d) or (j), whichever is applicable, be the same as are the effects specified in (d) or (j) of this section, whichever is applicable, on the cash surrender values as defined in that subsection. The nonforfeiture factor for each policy year shall be an amount equal to a percentage of the adjusted premium for the policy year, as defined in (h), (i), (j) and (m) of this section, whichever is applicable. Except as is required by the next succeeding sentence of this subsection, the percentage (1) must be the same percentage for each policy year between the second policy anniversary and the later of (A) the fifth policy anniversary and (B) the first policy anniversary at which there is available under the policy a cash surrender value in an amount, before including any paid-up additions and before deducting any indebtedness of at least two-tenths of one percent of either the amount, of insurance, if the insurance be uniform in amount, or the average amount of insurance at the beginning of each of the first 10 policy years; and (2) must be such that no percentage after the later of the two policy anniversaries specified in (1) of this subsection may apply to fewer than five consecutive policy years. Provided, that no basic cash value may be less than the value which would be obtained if the adjusted premiums for the policy, defined in (h), (i), and (j) of this section or in (m) of this section, whichever is applicable, were substituted for the nonforfeiture factors in the calculation of the basic cash value. All adjusted premiums and present values referred to in this subsection shall for a particular policy be calculated on the same mortality and interest bases as are used in demonstrating the policy compliance with the other subsections of this section. The cash surrender values referred to in this subsection shall include all endowment benefits provided for by the policy. Any cash surrender value available other than in the event of default in a premium payment due on a policy anniversary, and the amount of any paid-up nonforfeiture benefit available under the policy in the event of default in a premium payment shall be determined in manners consistent with the manner specified for determining the analogous minimum amounts in (b) — (g), (m), and (y) of this section. The amounts of any cash surrender values and of any paid-up nonforfeiture benefits granted in connection with additional benefits such as those listed as items (1) through (6) in (y) of this section shall conform with the principles of this subsection. (aa) This section does not apply to any of the following: (1) reinsurance; (2) group insurance; (3) pure endowment; (4) annuity or reversionary annuity contract; (5) term policy of uniform amount, which provides no guaranteed nonforfeiture or endowment benefits, or renewal thereof, of 20 years or less expiring before age 71, for which uniform premiums are payable during the entire term of the policy; (6) term policy of decreasing amount, which provides no guaranteed nonforfeiture or endowment benefits, on which each adjusted premium, calculated as specified in (h) — (w) of this section is less than the adjusted premiums calculated, on a policy of uniform amount or renewal thereof, which provides no guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same initial amount of insurance for a term defined as follows: for ages at issue 50 and under, the term shall be 15 years; thereafter, the term decrease one year for each year of age beyond 50, and for a term of 20 years or less expiring before age 71, for which uniform premiums are payable during the entire term of the policy; (7) policy, which provides no guaranteed nonforfeiture or endowment benefits, for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, calculated as specified in (d) — (w) of this section, exceeds two and one-half percent of the amount of insurance at the beginning of the same policy year; (8) policy which shall be delivered outside this state through an agent or other representative of the insurer issuing the policy. (bb) For purposes of determining the applicability of subsection (aa), the at expiry for a joint term life insurance policy shall be the age at expiry of the oldest life. (cc) The operative date of this section is January 1, 1968 except that an insurer may elect to comply with this section before that date by filing a written notice of election with the director. A written notice of election is not effective unless the insurer specifies in the notice (1) the date upon which this section is to be operative, which date must be later than the date on which the notice is filed; (2) the policies to which this section applies. (dd) In this section, “operative date of the valuation manual” means January 1 of the first calendar year that the valuation manual described in AS 21.18.112 is effective. Sec. 21.45.305. Standard nonforfeiture law for individual deferred annuities. (a) This section does not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer, including a partnership or sole proprietorship, or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under 26 U.S.C. 408 (Internal Revenue Code), as amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract that shall be delivered outside this state through an agent or other representative of the company issuing the contract. (b) In the case of contracts issued on or after the operative date of this section as defined in (k) of this section, no contract of annuity, except as stated in (a) of this section, may be delivered or issued for delivery in this state unless it contains in substance the following provisions, or corresponding provisions that, in the opinion of the director, are at least as favorable to the contract holder, upon cessation of payment of considerations under the contract: (1) that, upon cessation of payment of considerations under a contract or upon the written request of the contract holder, the company will grant a paid-up annuity benefit on a plan stipulated in the contract of the value specified in (d) — (g) and (i) of this section; (2) if a contract provides for a lump sum settlement at maturity, or at any other time, that, upon surrender of the contract at or before the commencement of any annuity payments, the company will pay, in lieu of any paid-up annuity benefit, a cash surrender benefit of the amount specified in (d), (e), (g) and (i) of this section; the company may reserve the right to defer the payment of that cash surrender benefit for a period not to exceed six months after demand for the payment with surrender of the contract after making a written request that addresses the necessity and equitableness to all contract holders of the deferral and after receiving written approval by the director; (3) a statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender, or death benefits that are guaranteed under the contract, together with sufficient information to determine the amounts of those benefits; (4) a statement that any paid-up annuity, cash surrender, or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which those benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract, or any prior withdrawals from or partial surrenders of the contract. Notwithstanding the requirements of this subsection, any deferred annuity contract may provide that, if no considerations have been received under a contract for a period of two full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid before that period would be less than $20 monthly, the company may, at its option, terminate the contract by payment in cash of the then present value of the portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by that payment shall be relieved of any further obligation under the contract. (c) The minimum values as specified in (d) — (g) and (i) of this section of any paid-up annuity, cash surrender, or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this section: (1) The minimum nonforfeiture amount at any time at or before the commencement of any annuity payments shall be equal to an accumulation up to that time at a rate of interest established under (2) of this subsection of the net considerations as defined in this paragraph paid before that time, decreased by the sum of (A) any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest established under (2) of this subsection; (B) the amount of any indebtedness to the company on the contract, including interest due and accrued; (C) an annual contract charge of $50, accumulated at a rate of interest established under (2) of this subsection; and (D) any premium tax paid by the company for the contract, accumulated at a rate of interest established under (2) of this subsection. The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount equal to 871/2 percent of the corresponding gross considerations credited to the contract during that contract year. (2) The interest rate used in determining minimum nonforfeiture amounts shall be an annual rate of interest determined as the lesser of three percent a year or the following, which shall be specified in the contract if the interest rate will be reset: (A) the five-year constant maturity treasury rate reported by the federal reserve as of a date, or average over a period, rounded to the nearest 1/ 20 of one percent, specified in the contract not more than 15 months before the contract issue date or redetermination date under (D) of this paragraph; (B) reduced by 125 basis points; (C) where the resulting interest rate is not less than one percent; and (D) the interest rate must apply for an initial period and may be redetermined for additional periods; the redetermination date, basis, and period, if any, must be stated in the contract; the basis is the date or average over a specified period that produces the value of the five-year constant maturity treasury rate to be used at each redetermination date. (3) During the period or term that a contract provides substantive participation in an equity indexed benefit, the contract may increase the reduction described in (2)(B) of this subsection by up to an additional 100 basis points to reflect the value of the equity index benefit. The present value at the contract issue date, and at each following redetermination date, of the additional reduction may not exceed the market value of the benefit. The director may require a demonstration of the present value of the additional reduction and may disallow or limit the additional reduction if the demonstration does not prove that the present value of the additional reduction does not exceed the market value of the benefit. (4) The director may by regulation provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit or for other contracts that the director determines require adjustment. An adjustment to the calculation of minimum nonforfeiture amounts authorized under this subsection may not result in an interest rate of less than one percent. (d) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract. (e) For contracts that provide cash surrender benefits, the cash surrender benefits available before maturity may not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit that would be provided under the contract at maturity arising from considerations paid before the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract. The present value shall be calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating considerations to determine the maturity value, unless a higher rate is approved by the director under AS 21.42.120 , decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event may any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under those contracts shall be at least equal to the cash surrender benefit. (f) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time before maturity may not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid before the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity. The present value shall be calculated for the period before the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine the maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits before the commencement of any annuity payments, the present values shall be calculated on the basis of the interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event may the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time. (g) For the purpose of determining the benefits calculated under (e) and (f) of this section, (1) the maturity date shall be the latest date for which election is permitted by the contract, but not later than the anniversary of the contract next following the annuitant's 70th birthday or the 10th anniversary of the contract, whichever is later; (2) a surrender charge may not be imposed on or past the maturity date of the contract, except that, for annuity contracts with one or more renewable guaranteed periods, a new surrender charge schedule may be imposed for each new guaranteed period if (A) the surrender charge is zero at the end of each guaranteed period and remains zero for at least 30 days; (B) the contract provides for continuation of the contract without surrender charges, unless the contract holder specifically elects a new guaranteed period with a new surrender charge schedule; and (C) the renewal period does not exceed 10 years and the maturity date complies with (1) of this subsection; (3) a contract that provides for flexible considerations may have separate surrender charge schedules associated with each consideration; for purposes of determining the maturity date, the 10th anniversary of the contract is determined separately for each consideration. (h) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount before the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided. (i) Any paid-up annuity, cash surrender, or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs. (j) For any contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of (d) — (g) and (i) of this section, additional benefits payable (1) in the event of total and permanent disability, (2) as reversionary annuity or deferred reversionary annuity benefits, or (3) as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits that may be required by this section. The inclusion of such additional benefits is not required in any paid-up benefits, unless those additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender, and death benefits. (k) After July 6, 1978, any company may file with the director a written notice of its election to comply with the provisions of this section after a specified date before July 6, 1980. After the filing of the notice, then upon the specified date, which shall be the operative date of this section for the company, this section shall become operative with respect to annuity contracts thereafter issued by the company. If a company makes no such election, the operative date of this section for the company shall be July 6, 1980. Sec. 21.45.310. Prohibited policy plans. (a) An insurer may not issue for delivery or deliver in this state a life insurance policy or annuity contract issued under any plan for the segregation of policyholders into mathematical groups and providing benefits for a surviving policyholder of a group arising out of the death of another policyholder of that group or under another similar plan. (b) An insurer may not issue for delivery or deliver in this state a life insurance policy or annuity contract providing benefits or values for surviving or continuing policyholders contingent upon the lapse or termination of the policies of other policyholders, whether by death or otherwise. This provision does not prohibit the payment or allowance of regular annual dividends or savings under participating forms of policies or contracts, or prohibit the annual distribution to policyholders or beneficiaries of sums representing in part gains to the insurer from lapses, surrenders, or mortality either in general or as resulting from particular classifications of policies. Sec. 21.45.320. Industrial life insurance defined. [Repealed, § 17 ch 21 SLA 1985.]