Empire State offiicials say life insurers should take care when designing a whole life insurance product with no maturity age.
The New York State Insurance Department has commented on the issue in a new batch of filing guidance.
The New York department already has discussed the issue of individual universal life policies without expiration or maturity ages in the individual universal life product outline.
In the whole life sector, both new and existing policies without expiration ages should become paid-up at some point, officials write in the new batch of guidance.
The paid-up age should not be “later than the last age in the mortality table that underlies the nonforfeiture values,” officials write.
Once the insured reaches the last age in the mortality table underlying the policy nonforfeiture value, the cash value should “increase annually at an interest rate not less than a reasonable current interest rate,” officials write.
In addition, the policy death benefit should always be at least equal to the cash value, and the policy should place no restrictions on any rights or benefits required by statute, such as the right to make loans, once the policy reaches paid-up status, officials write.
Officials say insurers can include a statement in the policy form recommending that consumers talk to a tax advisor about the tax consequences of keeping a policy past a certain age.
The New York whole life guidance is on the Web