NAC686A.4725. Requirements for basic illustration.

A basic illustration must conform with the following:

     1. The illustration must include the date on which it was prepared.

     2. Each page of the illustration, including, without limitation, any explanatory notes or pages, must be numbered in a manner that shows its relationship to the total number of pages in the illustration.

     3. The assumed dates of payment of premiums and benefits within a policy year must be clearly identified.

     4. If the age of the proposed insured is shown as a component of the tabular detail, it must be his or her age upon issuance of the policy plus the number of years the policy is assumed to be in force.

     5. The assumed payments on which the illustrated benefits and values are based must be identified as the premium outlay or contract premium. For policies that do not require a contract premium, the illustrated payment of premiums must be identified as premium outlay.

     6. Guaranteed death benefits and cash surrender values of the policy, if any, for the illustrated premium outlay or contract premium must be shown and clearly labeled as guaranteed.

     7. If the illustration shows any nonguaranteed elements, they must not be based on a scale more favorable to the policy owner than the insurer’s illustrated scale at any time during the term of the contract. Such elements must be clearly labeled as nonguaranteed.

     8. The guaranteed elements must be shown before corresponding nonguaranteed elements and must be specifically referred to on any page of an illustration that shows or describes only the nonguaranteed elements.

     9. If the account or accumulation value of the policy being illustrated is depicted, it must be identified by the name this value is given in the policy and shown in close proximity to the corresponding cash surrender value.

     10. The cash surrender value of the policy being illustrated must be identified by the name the cash surrender value is given in the policy and must be the amount available to the policy owner in a lump sum after deduction of any charges for surrendering the policy, policy loans and interest on policy loans.

     11. The illustration may show policy benefits and values in a graph or chart in addition to a tabular form.

     12. An illustration of nonguaranteed elements must be accompanied by a statement that the:

          (a) Benefits and values are not guaranteed;

          (b) Assumptions on which they are based are subject to change by the insurer; and

          (c) Actual results may be more or less favorable than is illustrated.

     13. If the illustration shows that the payer of the premium has the option to allow policy charges to be paid using nonguaranteed elements, the illustration must clearly set forth that a charge continues to be required and that, depending on actual results, the payer of the premium may need to continue or resume premium outlays. A similar disclosure must be made for premium outlay of lesser amounts or shorter durations than the contract premium. If a contract premium is due, the display of the premium outlay must not be left blank or show zero unless it is accompanied by an asterisk or similar mark to draw attention to the fact that the policy has not been paid up.

     14. If an applicant plans to use dividends or guaranteed or nonguaranteed policy values for any purpose, including, without limitation, to pay for all or a portion of the contract premium or policy charges, the illustration must set forth the impact of the use of the dividends and values on future policy benefits and values.

     (Added to NAC by Comm’r of Insurance by R089-97, eff. 1-14-98)