§ 31–4705.01. Nonforfeiture benefits and cash surrender values.

(a) This section shall apply only to policies of life insurance issued prior to the operative date of § 31-4705.02 (the standard nonforfeiture law).

(b) The nonforfeiture benefits referred to in paragraph (7) of subsection (a) of § 31-4703 shall be available to the insured in event of default in premium payments, after premiums shall have been paid for 3 years, and shall be a stipulated form of insurance, effective from the due date of the defaulted premium, the net value of which shall be at least equal to the reserve at the date of default on the policy and on dividend additions thereto, if any, exclusive of the reserve on account of return premium insurance and on total and permanent disability and additional accidental death benefits (the policy to specify the mortality table and rate of interest adopted for computing such reserve), less a specified percentage (not more than 2 1/2) of the amount insured by the policy and of existing dividend additions thereto, if any, and less any existing indebtedness to the company on or secured by the policy; provided, that a company may, in lieu of the provision herein permitted for the deduction from the reserve of a sum not more than 2 1/2% of the amount insured by the policy, and of any dividend additions thereto, insert in the policy a provision that one fifth of said reserve may be deducted, or may provide therein that a deduction may be made of said 2 1/2% or one fifth of said reserve, at the option of the company; provided further, that the policy may be surrendered to the company at its home office within 1 month of the due date of defaulted premium for a specified cash value at least equal to the sum which would otherwise be available for the purchase of insurance as aforesaid; and provided further, that the company may defer payment for not more than 6 months after the application therefor is made. A provision may also be inserted in the policy that in event of default in a premium payment before such benefit becomes available, the reserve on any dividend additions then in force may at the option of the company be paid in cash or applied as a net premium to the purchase of paid-up term insurance for any amount not in excess of the face of the original policy. This section shall not apply to term insurance of 20 years or less. The net single premium rate employed in computing the term of temporary insurance or the amount of pure endowment insurance granted as a nonforfeiture value under any life insurance policy may at the option of the company be based upon a table of mortality showing rates of mortality not greater than 130 per centum of those shown by the American Men Ultimate Table of Mortality instead of the table used in computing the reserve on the policy, or in case of substandard policies not greater than 130 per centum of the rates of mortality shown by the table of mortality approved by the Commissioner for computing the reserve on the policy, anything herein to the contrary notwithstanding.