    INSURANCE CODE
    TITLE 7. LIFE INSURANCE AND ANNUITIES
    SUBTITLE A. LIFE INSURANCE IN GENERAL
    CHAPTER 1105. STANDARD NONFORFEITURE LAW FOR LIFE INSURANCE
    SUBCHAPTER A. GENERAL PROVISIONS
    Sec. 1105.001.  SHORT TITLE.  This chapter may be cited as the Standard Nonforfeiture Law for Life Insurance.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.0015.  DEFINITION.  In this chapter, "operative date of the valuation manual" means the date, if any, on which the valuation manual described by Subchapter B, Chapter 425 (Standard Valuation Law), becomes operative as provided by that subchapter.
    Added by Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 16, eff. September 1, 2015.

    Sec. 1105.002.  APPLICABILITY OF CHAPTER.  (a)  This chapter applies to a policy issued by a company on or after January 1, 1974.(b)  This chapter also applies to a policy issued by a company after a date specified in a written notice:(1)  that was filed by the company with the State Board of Insurance after August 23, 1963, but before January 1, 1974;  and(2)  under which the company filing the notice elected to comply before January 1, 1974, with the law codified by this chapter.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.003.  EXEMPTIONS.  (a)  This chapter does not apply to:(1)  reinsurance;(2)  group insurance;(3)  pure endowment;(4)  an annuity or reversionary annuity contract;(5)  a term policy of uniform amount that:(A)  does not provide guaranteed nonforfeiture or endowment benefits or renewal of the policy;(B)  has a term of 20 years or less that expires before the insured reaches 71 years of age;  and(C)  has uniform premiums that are payable during the entire term of the policy;(6)  a term policy of decreasing amount:(A)  that does not provide guaranteed nonforfeiture or endowment benefits;  and(B)  on which each adjusted premium, computed as specified by Subchapter B or D, is less than the adjusted premium computed in that manner for a term policy of uniform amount, or a renewal of a term policy of uniform amount, that:(i)  does not provide guaranteed nonforfeiture or endowment benefits;(ii)  is issued at the same age and for the same initial amount of insurance;(iii)  has a term of 20 years or less and expires before the insured reaches 71 years of age;  and(iv)  has uniform premiums that are payable during the entire term of the policy;(7)  a policy:(A)  that does not provide guaranteed nonforfeiture or endowment benefits;  and(B)  for which no cash surrender value, if any, or present value of any paid-up nonforfeiture benefit, at the beginning of any policy year, computed as specified by Section 1105.007, 1105.008, 1105.009, Subchapter B, or Subchapter D, exceeds 2-1/2 percent of the amount of insurance at the beginning of the same policy year;(8)  a policy delivered outside this state through an agent or other representative of the company that issued the policy;  or(9)  a policy that:(A)  does not provide for cash values or nonforfeiture values;  and(B)  meets the requirements of Section 884.403(b).(b)  For purposes of determining the applicability of this chapter, the age at expiry of a joint term life insurance policy is the age at expiry of the oldest insured life on that date.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.004.  REQUIRED NONFORFEITURE PROVISIONS.  (a)  A life insurance policy delivered or issued for delivery in this state must contain in substance the provisions prescribed by Subsections (b), (c), and (d) or corresponding provisions that:(1)  in the opinion of the department, are at least as favorable to the defaulting or surrendering policyholder;  and(2)  essentially comply with Section 1105.012.(b)  A life insurance policy must provide that if there is a default in the payment of a premium the company, on proper request not later than the 60th day after the due date of the premium that is in default, will grant a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as of that due date, in the amount specified by this chapter.  A company may substitute for the paid-up nonforfeiture benefit required by this subsection 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 or earlier payment of endowment benefits.  To elect an alternative paid-up nonforfeiture benefit under this subsection, the person entitled to make the election must submit a proper request not later than the 60th day after the due date of the premium that is in default. (c)  A life insurance policy must:(1)  provide that on surrender of the policy not later than the 60th day after the due date of a premium payment that is in default the company will pay, in lieu of a paid-up nonforfeiture benefit, a cash surrender value in the amount specified by this chapter if the premiums have been paid for at least:(A)  three full years for a policy of ordinary insurance;  or(B)  five full years for a policy of industrial insurance;(2)  provide that a specified paid-up nonforfeiture benefit is effective as specified by the policy unless the person entitled to make the election elects another available option not later than the 60th day after the due date of a premium payment that is in default;  and(3)  provide that on surrender of the policy not later than the 30th day after any policy anniversary the company will pay a cash surrender value in the amount specified by this chapter if:(A)  the policy has become paid up by completion of all premium payments;  or(B)  the policy is continued under a paid-up nonforfeiture benefit that became effective on or after:(i)  the third policy anniversary for a policy of ordinary insurance;  or(ii)  the fifth policy anniversary for a policy of industrial insurance.(d)  A life insurance policy must contain:(1)  subject to Subsection (e), a statement of:(A)  the mortality table, interest rate, and method used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, if the policy:(i)  causes, on a basis guaranteed by the policy, unscheduled changes in benefits or premiums;  or(ii)  provides an option for changes in benefits or premiums other than a change to a new policy;  or(B)  the mortality table and interest rate used to compute the cash surrender values and the paid-up nonforfeiture benefits available under the policy, 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 during the first 20 policy years or the term of the policy, whichever is shorter, if the policy is a policy other than one described by Paragraph (A)(i) or (ii);(2)  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 the insurance laws of this state;(3)  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 company on the policy and, if a detailed statement of the method used to compute 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 department;  and(4)  a statement of the method to be used to compute the cash surrender value and paid-up nonforfeiture benefit available under the policy on any policy anniversary after the last anniversary for which those values and benefits are consecutively shown in the policy.(e)  The values and benefits described by Subsection (d)(1)(B) must be computed on the assumption that:(1)  there are no dividends or paid-up additions credited to the policy;  and(2)  there is no indebtedness to the company on the policy.(f)  A provision prescribed by Subsection (b), (c), or (d) or a portion of a provision that does not apply because of the plan of insurance may, to the extent inapplicable, be omitted from the policy.(g)  A company shall reserve the right to defer payment of any cash surrender value for a period of six months after demand for payment of the cash surrender value and surrender of the policy.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.005.  COMPUTATION OF ADJUSTED PREMIUMS AND PRESENT VALUES;  MORTALITY TABLES AND INTEREST RATES.  (a)  Except as provided by Subsection (b) or (e) or Section 1105.055, 1105.152, or 1105.153, an adjusted premium or present value determined under this chapter must be computed on the basis of:(1)  the Commissioners 1941 Standard Ordinary Mortality Table for a policy of ordinary insurance;  and(2)  the Commissioners 1941 Standard Industrial Mortality Table for a policy of industrial insurance.(b)  For a category of ordinary insurance issued to insure a female risk, an adjusted premium or present value may be computed according to an age not more than three years younger than the actual age of the insured.(c)  All computations must be made using the rate of interest, not to exceed 3-1/2 percent a year, specified by the policy for computing cash surrender values and paid-up nonforfeiture benefits.(d)  In the computation of 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 shown in the applicable mortality table.(e)  Subject to approval by the department, a company may specify a mortality table other than the applicable table required by this section for use in computing an adjusted premium or present value for insurance issued on a substandard basis.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.006.  DETERMINATION OF RATED AGE.  For purposes of this chapter, the date a policy is issued is the date as of which the rated age of the insured is determined.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.007.  COMPUTATION OF CASH SURRENDER VALUE FOLLOWING DEFAULT.  (a)  Any cash surrender value available under a policy on a default in payment of a premium due on a policy anniversary, regardless of whether required by Section 1105.004, must be an amount not less than the amount, if any, by which the present value, on the policy anniversary, of the future guaranteed benefits that would have been available under the policy, including any existing paid-up additions, had there not been a default exceeds the sum of:(1)  the then present value of the adjusted premiums as determined under Subchapter B or D that correspond to premiums that would have become due on and after the policy anniversary;  and(2)  the amount of any indebtedness to the company on the policy.(b)  Subsection (a) does not require a cash surrender value greater than the reserve for the policy computed as provided by Subchapter B, Chapter 425.(c)  For a policy to which Subchapter B applies and that by rider or supplemental policy provision provides supplemental life insurance or annuity benefits at the option of the insured and for an identifiable additional premium, the cash surrender value computed under Subsection (a) must be an amount not less than the sum of:(1)  the cash surrender value as computed under Subsection (a) for an otherwise similar policy issued at the same age without the rider or supplemental policy provision;  and(2)  the cash surrender value as computed under Subsection (a) for a policy that provides only the benefits provided by the rider or supplemental policy provision.(d)  For a family policy to which Subchapter B applies and that defines a primary insured and provides term insurance on the life of the spouse of the primary insured that expires before the spouse reaches 71 years of age, the cash surrender value as computed under Subsection (a) must be an amount not less than the sum of:(1)  the cash surrender value as computed under Subsection (a) for an otherwise similar policy issued at the same age that does not provide the term insurance on the life of the spouse;  and(2)  the cash surrender value as computed under Subsection (a) for a policy that provides only the benefits provided by the term insurance on the life of the spouse.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.Amended by: Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2F.004, eff. April 1, 2009.

    Sec. 1105.008.  COMPUTATION OF CASH SURRENDER VALUE ON SURRENDER FOLLOWING POLICY ANNIVERSARY.  Any cash surrender value available not later than the 30th day after the date of a policy anniversary under a policy paid up by completion of all premium payments or a policy continued under any paid-up nonforfeiture benefit, regardless of whether required by Section 1105.004, must be an amount not less than the present value, on the policy anniversary, of the future guaranteed benefits available under the policy, including any existing paid-up additions, less any indebtedness to the company on the policy.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.009.  COMPUTATION OF PAID-UP NONFORFEITURE BENEFITS.  Any paid-up nonforfeiture benefit available under the policy on default in the payment of a premium due on a policy anniversary must be such that its present value as of the policy anniversary is at least equal to:(1)  the cash surrender value then available under the policy;  or(2)  if a cash surrender value is not available under the policy, the cash surrender value that would have been required by this chapter in the absence of the condition that premiums must have been paid for at least a specified period.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.010.  PRORATION OF VALUES;  NET VALUE OF PAID-UP ADDITIONS.  (a)  Any cash surrender value and any paid-up nonforfeiture benefit available under a policy on default in the payment of a premium due at any time other than on the policy anniversary must be computed with allowance for the lapse of time and the payment of fractional premiums after the preceding policy anniversary, except that a cash surrender value or nonforfeiture benefit is not required unless the cash surrender value or nonforfeiture benefit was required on the preceding policy anniversary.(b)  A value determined under Sections 1105.005-1105.009, Subchapter B, or Subchapter D may be computed on the assumption that any death benefit is payable at the end of the policy year of death.(c)  The net value of any paid-up additions, other than paid-up term additions, may not be less than the amounts used to provide those additions.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.011.  INCLUSION OF CERTAIN ADDITIONAL BENEFITS IN COMPUTING NONFORFEITURE BENEFITS NOT REQUIRED.  (a)  Notwithstanding Section 1105.007 or 1105.008, additional benefits described by Subsection (b), and premiums for those benefits, may not be included in computing a cash surrender value or nonforfeiture benefits required by this chapter.  Additional benefits described by Subsection (b) are not required to be included in any paid-up nonforfeiture benefits.(b)  This section applies to additional benefits payable:(1)  in the event of death or dismemberment by accident;(2)  in the event of total and permanent disability;(3)  as 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 chapter would not apply;(5)  as term insurance on the life of a child that:(A)  is provided in a policy on the life of a parent of the child;(B)  expires before the child reaches 26 years of age;(C)  is uniform in amount after the child reaches one year of age;  and(D)  has not become paid up by reason of the death of a parent of the child;  or(6)  as other policy benefits additional to life insurance and endowment benefits.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.012.  PROGRESSION OF CASH SURRENDER VALUES.  (a)  This section applies only to a policy issued on or after January 1, 1985.(b)  Any cash surrender value available under a policy to which this section applies on default in the payment of a premium due on any policy anniversary must be in an amount that does not differ by more than two-tenths of one percent of 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, from the sum of:(1)  the greater of:(A)  zero;  or(B)  the basic cash value as determined under Subsection (c);  and(2)  the present value of any existing paid-up additions minus the amount of any indebtedness to the company under the policy.(c)  The basic cash value must be equal to the present value, on the applicable policy anniversary, of the future guaranteed benefits that would have been available under the policy, excluding any existing paid-up additions and before deduction of any indebtedness to the company, had there not been a default, less the then present value of the nonforfeiture factors specified by Subsection (d) corresponding to premiums that would have become due on and after that anniversary.  The effects on the basic cash value of supplemental life insurance or annuity benefits or of family coverage, as described by Section 1105.007 or 1105.151, as applicable, must be the same as the effects specified by Section 1105.007 or 1105.151, as applicable, on the cash surrender values determined under the applicable section.(d)  The nonforfeiture factor for each policy year must be an amount equal to a percentage of the adjusted premium for the policy year, as computed under Section 1105.052 or 1105.151, as applicable.  That percentage must:(1)  be the same percentage for each policy year between the second policy anniversary and the later of:(A)  the fifth policy anniversary;  or(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:(i)  the amount of insurance, if the insurance is uniform in amount;  or(ii)  the average amount of insurance at the beginning of each of the first 10 policy years;  and(2)  be such that each percentage after the later of the policy anniversaries specified by Subdivision (1) applies to at least five consecutive policy years.(e)  Notwithstanding Subsection (d), the basic cash value may not be less than the value that would be obtained if the adjusted premiums for the policy, as computed under Section 1105.052 or 1105.151, as applicable, were substituted for the nonforfeiture factors in the computation of the basic cash value.(f)  In this section:(1)  an adjusted premium or present value for a particular policy must be computed on the same mortality and interest bases as those used to demonstrate that the policy complies with the other sections of this chapter;  and(2)  the cash surrender values must include any endowment benefits available under the policy.(g)  The amount of any cash surrender value available other than on default in payment of a premium due on a policy anniversary, and the amount of any paid-up nonforfeiture benefits available under the policy on default in the payment of a premium, must be determined in a manner consistent with the manner specified by Section 1105.004, 1105.007, 1105.008, 1105.009, 1105.010, 1105.011, or Subchapter B to determine the analogous minimum amount.  The amounts of any cash surrender value or paid-up nonforfeiture benefits granted in connection with additional benefits, such as those listed in Section 1105.011(b), must comply with the principles of this section.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    SUBCHAPTER B. COMPUTATION OF ADJUSTED PREMIUMS USING NONFORFEITURE NET LEVEL PREMIUM METHOD
    Sec. 1105.051.  APPLICABILITY OF SUBCHAPTER.  (a)  This subchapter applies to a policy issued on or after January 1, 1989.(b)  This subchapter also applies to a policy issued by a company after the date specified in a written notice:(1)  that was filed with the State Board of Insurance after August 31, 1981, but before January 1, 1989;  and(2)  under which the company filing the notice elected to comply before January 1, 1989, with the law codified by this subchapter.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.052.  COMPUTATION OF ADJUSTED PREMIUMS USING NONFORFEITURE NET LEVEL PREMIUM METHOD.  (a)  Except as provided by Section 1105.054 and subject to Subsection (b), the adjusted premiums for a policy to which this section applies must be computed on an annual basis and must be a uniform percentage of the respective premiums specified by the policy for each policy year so that the present value, at the date of issue of the policy, of all adjusted premiums is equal to the sum of:(1)  the then present value of the future guaranteed benefits available under the policy;(2)  one percent of:(A)  the amount of insurance, if the insurance is uniform in amount;  or(B)  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 determined under Subsection (d).(b)  The amount of premiums specified by the policy and used in computing adjusted premiums under Subsection (a) does not include:(1)  an amount payable as an extra premium to cover an impairment or special hazard;  or(2)  any uniform annual contract charge or policy fee specified by the policy in a statement of the method to be used to compute the cash surrender values and paid-up nonforfeiture benefits.(c)  In applying the percentage specified by Subsection (a)(3), a nonforfeiture net level premium may not be considered to exceed four percent of:(1)  the amount of insurance, if the insurance is uniform in amount;  or(2)  the average amount of insurance at the beginning of each of the first 10 policy years.(d)  The nonforfeiture net level premium must be equal to the present value, at the date of issue of the policy, of the guaranteed benefits available under the policy divided by the present value, on the date of issue of the policy, of an annuity of one per year payable on the date of issue of the policy and on each anniversary of the policy on which a premium becomes due.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.053.  COMPUTATION OF AMOUNTS FOR POLICY WITH CHANGING BENEFITS OR PREMIUMS.  (a)  This section applies only to a policy that:(1)  causes, on a basis guaranteed by the policy, unscheduled changes in benefits or premiums;  or(2)  provides an option for changes in benefits or premiums other than a change to a new policy.(b)  The adjusted premiums and present values as to a policy to which this section applies must initially be computed on the assumption that future benefits and premiums will not change from those specified on the date the policy is issued.  At the time of a change in the benefits or premiums, the future adjusted premiums, nonforfeiture net level premiums, and present values must be recomputed on the assumption that future benefits and premiums will not change from those specified by the policy immediately after the change.(c)  Except as provided by Section 1105.054, the recomputed future adjusted premiums as to a policy to which this section applies must be a uniform percentage of the respective future premiums specified by the policy for each policy year, so that the present value, at the time of change to the newly defined benefits or premiums, of all future adjusted premiums is equal to the amount by which the sum of the then present value of the then future guaranteed benefits available under the policy and the additional expense allowance, as computed under Subsection (e), if any, exceeds the then cash surrender value, if any, or present value of any paid-up nonforfeiture benefit under the policy.(d)  The amount of future premiums specified by the policy and used in computing adjusted premiums under Subsection (c) does not include:(1)  an amount payable as an extra premium to cover an impairment or special hazard;  or(2)  any uniform annual contract charge or policy fee specified by the policy in a statement of the method to be used to compute the cash surrender values and paid-up nonforfeiture benefits.(e)  The additional expense allowance, at the time of the change to the newly defined benefits or premiums, is the sum of:(1)  one percent of the amount, if any, by which the average amount of insurance at the beginning of each of the first 10 policy years after the change exceeds 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 not been a previous change, the date the policy is issued;  and(2)  125 percent of any increase in the nonforfeiture net level premium.(f)  The recomputed nonforfeiture net level premium must be equal to the quotient of:(1)  the sum of:(A)  the nonforfeiture net level premium applicable before the change multiplied by the present value of an annuity of one per year payable on each anniversary of the policy on or after the date of the change on which a premium would have become due had the change not occurred;  and(B)  the present value of the increase in future guaranteed benefits available under the policy;  divided by(2)  the present value of an annuity of one per year payable on each anniversary of the policy, on or after the date of the change, on which a premium becomes due.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.054.  COMPUTATION OF AMOUNTS FOR POLICY ISSUED ON SUBSTANDARD BASIS.  (a)  This section applies only to a policy issued on a substandard basis that 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 that provides higher uniform amounts of insurance.  This section applies notwithstanding any provision of this subchapter to the contrary.(b)  Adjusted premiums and present values as to a policy to which this section applies may be computed as if the policy were issued to provide the higher uniform amounts of insurance of an otherwise similar policy issued on the standard basis.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.055.  USE OF MORTALITY TABLES AND INTEREST RATES WITH NONFORFEITURE NET LEVEL PREMIUM METHOD.  (a)  Subject to Subsections (c)-(i), an adjusted premium or present value computed under this subchapter must be computed:(1)  for a policy of ordinary insurance:(A)  on the basis of the Commissioners 1980 Standard Ordinary Mortality Table;  or(B)  at the option of the company for any one or more specified plans of life insurance, on the basis of the Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year Select Mortality Factors;  and(2)  for a policy of industrial insurance, on the basis of the Commissioners 1961 Standard Industrial Mortality Table.(b)  Subject to Subsections (c)-(i), computations on each policy issued in a particular calendar year must be made using a rate of interest not to exceed the nonforfeiture interest rate as defined by Section 1105.056 for a policy issued in that calendar year.(c)  At the option of the company, computations for each policy issued in a particular calendar year may be made using a rate of interest not to exceed the nonforfeiture interest rate, as defined by Section 1105.056, for a policy issued in the preceding calendar year.(d)  Under any paid-up nonforfeiture benefit, including any paid-up dividend additions, any cash surrender value available, regardless of whether required by Section 1105.004, must be computed on the basis of the mortality table and rate of interest used to determine the amount of the paid-up nonforfeiture benefit and any paid-up dividend additions.(e)  A company may compute the amount of any guaranteed paid-up nonforfeiture benefit, including any paid-up additions under the policy, on the basis of an interest rate not less than the rate specified by the policy for computing cash surrender values.(f)  In the computation of 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 the rates shown in:(1)  the Commissioners 1980 Extended Term Insurance Table, for a policy of ordinary insurance;  or(2)  the Commissioners 1961 Industrial Extended Term Insurance Table, for a policy of industrial insurance.(g)  For a policy issued on a substandard basis, the computation of any adjusted premium or present value may be based on appropriate modifications to a table described by Subsection (f).(h)  For a policy issued before the operative date of the valuation manual, any ordinary mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by rules adopted by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for:(1)  the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors; or(2)  the Commissioners 1980 Extended Term Insurance Table.(i)  For a policy issued before the operative date of the valuation manual, any industrial mortality table adopted after 1980 by the National Association of Insurance Commissioners that is approved by rules adopted by the commissioner for use in determining the minimum nonforfeiture standard may be substituted for:(1)  the Commissioners 1961 Standard Industrial Mortality Table; or(2)  the Commissioners 1961 Industrial Extended Term Insurance Table.(j)  Except as provided by Subsection (k), for a policy described by Subsection (h) 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:(1)  the Commissioners 1980 Standard Ordinary Mortality Table with or without Ten-Year Select Mortality Factors; or(2)  the Commissioners 1980 Extended Term Insurance Table.(k)  If the commissioner by rule adopts 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, the minimum nonforfeiture standard determined in accordance with that table supersedes the standard provided by the valuation manual.(l)  Except as provided by Subsection (m), for a policy described by Subsection (i) issued on or after the operative date of the valuation manual, the valuation manual must include the commissioners standard industrial mortality table for use in determining the minimum nonforfeiture standard that may be substituted for:(1)  the 1961 Standard Industrial Mortality Table; or(2)  the Commissioners 1961 Industrial Extended Term Insurance Table.(m)  If the commissioner by rule adopts 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, the minimum nonforfeiture standard determined in accordance with that table supersedes the standard provided by the valuation manual.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.Amended by: Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 17, eff. September 1, 2015.

    Sec. 1105.056.  NONFORFEITURE INTEREST RATE.  (a)  For a policy issued before the operative date of the valuation manual, the annual nonforfeiture interest rate for a policy issued in a particular calendar year is equal to 125 percent of the calendar year statutory valuation interest rate for that policy as defined by Subchapter B, Chapter 425, rounded to the nearest one-fourth of one percent, except that the rate may not be less than four percent.(b)  For a policy issued on or after the operative date of the valuation manual, the annual nonforfeiture interest rate for any policy issued in a particular calendar year is provided by the valuation manual.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.Amended by: Acts 2007, 80th Leg., R.S., Ch. 730 (H.B. 2636), Sec. 2F.005, eff. April 1, 2009.Acts 2015, 84th Leg., R.S., Ch. 313 (S.B. 1654), Sec. 18, eff. September 1, 2015.

    Sec. 1105.057.  REFILING OF POLICY PROVISIONS NOT REQUIRED.  Notwithstanding any provision of this code to the contrary, as to a policy to which this subchapter applies, a refiling of nonforfeiture values or of the method of computing nonforfeiture values for a previously approved policy form that involves only a change in the interest rate or mortality table used to compute nonforfeiture values does not require refiling of any provision of the policy form.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    SUBCHAPTER C. NONFORFEITURE BENEFITS FOR CERTAIN PLANS
    Sec. 1105.101.  NONFORFEITURE BENEFITS FOR INDETERMINATE PREMIUM PLANS AND CERTAIN OTHER PLANS.  (a)  This section applies to a plan of life insurance that:(1)  provides for future premium determination, the amounts of which are to be determined by the insurance company based on then estimates of future experience;  or(2)  is such that minimum values cannot be determined by a method described by Sections 1105.004-1105.009, Subchapter B, or Subchapter D.(b)  The department must be satisfied that:(1)  the benefits provided under the plan are substantially as favorable to policyholders and insureds as the minimum benefits otherwise required by Sections 1105.004-1105.009, Subchapter B, or Subchapter D;  and(2)  the benefits and the pattern of premiums of the plan are not such as to mislead prospective policyholders or insured persons.(c)  The cash surrender values and paid-up nonforfeiture benefits provided by the plan may not be less than the minimum values and benefits required for the plan computed by a method consistent with the principles of this subchapter as determined under rules adopted by the commissioner.(d)  Notwithstanding any other law of this state, any policy, contract, or certificate providing life insurance under the plan must be approved by the department before the plan may be marketed, issued, delivered, or used in this state.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    SUBCHAPTER D. COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN POLICIES
    Sec. 1105.151.  COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN POLICIES ISSUED BEFORE JANUARY 1, 1989.  (a)  This section applies only to a policy issued before January 1, 1989, to which Subchapter B does not apply.(b)  The adjusted premiums for a policy to which this section applies must be computed on an annual basis or, at the option of the company, on a fully continuous basis if that basis is consistent with actual policy provisions and the use of that basis is specified by the policy.(c)  Except as provided by Subsection (f), the adjusted premiums must be a uniform percentage of the respective premiums specified by the policy for each policy year, excluding amounts stated in the policy as extra premiums to cover impairments or special hazards, so that the present value, as of the date the policy is issued, of all the adjusted premiums is equal to the sum of:(1)  the then present value of the future guaranteed benefits available under the policy;(2)  two percent of:(A)  the amount of insurance, if the insurance is uniform in amount;  or(B)  the equivalent uniform amount of insurance, as determined under this section, if the amount of insurance varies with the duration of the policy;(3)  40 percent of the adjusted premium for the first policy year;  and(4)  25 percent of the lesser of:(A)  the adjusted premium for the first policy year;  or(B)  the adjusted premium for a whole life policy of the same or an equivalent uniform amount with uniform premiums for the whole of life issued at the same age for the same amount of insurance.(d)  In applying the percentages specified by Subsections (c)(3) and (4), an adjusted premium may not be considered to exceed four percent of the amount of insurance or equivalent uniform amount.(e)  For purposes of this section, for a policy that provides an amount of insurance that varies with the duration of the policy:(1)  except as provided by Subdivision (2), the equivalent uniform amount of insurance is considered to be the uniform amount of insurance provided by an otherwise similar policy, containing the same endowment benefit, 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 date of issue as the benefits under the policy;  and(2)  if the policy is issued on the life of a child younger than 10 years of age, the equivalent uniform amount of insurance may be computed as though the amount of insurance provided by the policy before the insured reaches 10 years of age were the amount provided by the policy at age 10.(f)  The adjusted premiums for a policy that provides term insurance benefits by rider or a supplemental policy provision must be equal to 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 the adjusted premiums for the term insurance.  The adjusted premiums specified by this subsection must be computed separately in the manner specified by Subsections (b)-(e).
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.152.  COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN ORDINARY POLICIES ISSUED BEFORE JANUARY 1, 1989.  (a)  Except as provided by Subsection (b), this section applies only to an ordinary policy to which Subchapter B does not apply and that is issued on or after January 1, 1974 and before January 1, 1989.(b)  This section also applies to an ordinary policy issued by a company after a date specified in a written notice:(1)  that was filed by the company with the State Board of Insurance after August 23, 1963, but before January 1, 1974;  and(2)  under which the company filing the notice elected to comply before January 1, 1974, with the law codified by this section.(c)  An adjusted premium or present value determined under this chapter as to a policy to which this section applies must be computed on the basis of the Commissioners 1958 Standard Ordinary Mortality Table.(d)  A computation as to a policy to which this section applies must be made using the rate of interest specified by the policy for computing cash surrender values and paid-up nonforfeiture benefits, except that the rate of interest may not exceed:(1)  3-1/2 percent a year for a policy issued before June 14, 1973;(2)  4 percent a year for a policy issued on or after June 14, 1973, and before August 29, 1977;(3)  5-1/2 percent a year for a policy issued on or after August 29, 1977, other than a single premium whole life or endowment insurance policy;  or(4)  6-1/2 percent a year for a single premium whole life or endowment insurance policy issued on or after August 29, 1977.(e)  For a category of ordinary insurance issued to insure a female risk:(1)  an adjusted premium or present value for a policy issued before August 29, 1977, may be computed according to an age not more than three years younger than the actual age of the insured;  and(2)  an adjusted premium or present value for a policy issued on or after August 29, 1977, may be computed according to an age not more than six years younger than the actual age of the insured.(f)  In the computation of 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 not exceed the rates shown in the Commissioners 1958 Extended Term Insurance Table.(g)  Subject to approval by the department, a company may specify a mortality table other than the table required by this section for use in computing an adjusted premium or present value for insurance issued on a substandard basis.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.

    Sec. 1105.153.  COMPUTATION OF ADJUSTED PREMIUMS FOR CERTAIN INDUSTRIAL POLICIES ISSUED BEFORE JANUARY 1, 1989.  (a)  Except as provided by Subsection (b), this section applies only to an industrial policy to which Subchapter B does not apply and that is issued on or after January 1, 1974, and before January 1, 1989.(b)  This section also applies to an industrial policy issued by a company after a date specified in a written notice:(1)  that was filed by the company with the State Board of Insurance after August 23, 1963, but before January 1, 1974;  and(2)  under which the company filing the notice elected to comply before January 1, 1974, with the law codified by this section.(c)  An adjusted premium or present value determined under this chapter as to a policy to which this section applies must be computed on the basis of the Commissioners 1961 Standard Industrial Mortality Table.(d)  A computation as to a policy to which this section applies must be made using the rate of interest specified by the policy for computing cash surrender values and paid-up nonforfeiture benefits, except that the rate of interest may not exceed:(1)  3-1/2 percent a year for a policy issued before June 14, 1973;(2)  4 percent a year for a policy issued on or after June 14, 1973, and before August 29, 1977;(3)  5-1/2 percent a year for a policy issued on or after August 29, 1977, other than a single premium whole life or endowment insurance policy;  or(4)  6-1/2 percent a year for a single premium whole life or endowment insurance policy issued on or after August 29, 1977.(e)  In the computation of 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 not exceed the rates shown in the Commissioners 1961 Industrial Extended Term Insurance Table.(f)  Subject to approval by the department, a company may specify a mortality table other than the table required by this section for use in computing an adjusted premium or present value for insurance issued on a substandard basis.
    Added by Acts 2001, 77th Leg., ch. 1419, Sec. 2, eff. June 1, 2003.