26-38-109. Nonforfeiture benefit provisions.

(a) Subject to subsection (g) of this section, an insurer that offers a long-term care insurance policy or certificate in this state shall offer a nonforfeiture protection provision as an option. The nonforfeiture benefit shall be made available in the event of a default in the payment of any premiums, or upon the surrender of the policy or certificate by the policyholder or certificate holder.

(b) Subject to subsection (g) of this section, the nonforfeiture provision offered for a policy which is not intended to be a qualified long-term insurance contract, shall be appropriately captioned and shall provide at least one (1) of the following:

(i) Reduced paid-up insurance;

(ii) Extended term insurance;

(iii) Cash surrender values;

(iv) A return of premium;

(v) A shortened benefit period; or

(vi) Other offerings as approved by the commissioner.

(c) Nonforfeiture benefits shall be computed in an actuarially sound manner, using a methodology that has been filed with and approved by the commissioner. At the time of lapse, or upon request by the policyholder or certificate holder, the insurer shall disclose the then-accrued nonforfeiture values. At the time the policy or certificate is issued, the insurer shall provide to the policyholder or certificate holder schedules demonstrating estimated values of nonforfeiture benefits. The schedules shall state that the estimated values are not to be construed as guaranteed nonforfeiture values.

(d) The amount of nonforfeiture benefits shall be adjusted subsequent to being initially granted only as necessary to reflect changes in claims, persistency and interest as reflected in changes in rates for premium paying policies approved by the commissioner for the same policy form.

(e) This section does not apply to life insurance policies or riders containing accelerated long-term care benefits.

(f) Nonforfeiture benefits for qualified long-term care insurance contracts shall include at least a reduced paid-up insurance benefit, an extended term insurance benefit, the offer of a shortened benefit period, or other similar offerings approved by the secretary of the treasury, and shall be provided as specified in regulations. The issuer of such a contract may refund premiums upon complete surrender or cancellation of the contract or policy, as long as the refund does not exceed the aggregate premiums paid for the contract or policy.

(g) Within fifteen (15) business days following receipt of written proof of the death of an insured, an insurer under this chapter shall refund unearned premiums paid for any period beyond the death of the insured. The amount of the refund shall be pro rata from the date of death.