The interest rate used to determine minimum nonforfeiture amounts shall be an annual rate of interest that is the lower of 3 percent and the higher of either of the following:
The 5-year constant maturity treasury rate reported by the federal reserve board as of a date, or average over a period, specified in the contract no longer than 15 months prior to the contract issue date or redetermination date under par. (d)
, less 125 basis points or, if the contract provides substantive participation in an equity indexed benefit during the period or term, the contract may increase the reduction by up to an additional 100 basis points to reflect the value of the equity index benefit, and rounded to the nearest one-twentieth of 1 percent.
The interest rate determined under par. (c)
shall apply for an initial period and may be redetermined for additional periods. The redetermination date, basis, and period, if any, shall be stated in the contract. The basis is the date or average over a specified period that produces the value of the 5-year constant maturity treasury rate to be used at each redetermination date. The method for determining the interest rate under par. (c)
shall be specified in the contract if the interest rate will be reset.
The present value at the contract issue date, and at each redetermination date, of the additional reduction under par. (c) 1.
for substantive participation in an equity index benefit may not exceed the market value of the benefit. The commissioner may require a demonstration that the present value of the additional reduction does not exceed the market value of the benefit. The commissioner may disallow or limit the additional reduction if the commissioner determines that the demonstration is unacceptable.
The commissioner may promulgate rules for the implementation of par. (e)
and to provide for further adjustments to the calculation of minimum nonforfeiture amounts for contracts that provide substantive participation in an equity index benefit and for other contracts for which the commissioner determines adjustments are justified.
Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate or rates specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.
For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than one percent higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. No cash surrender benefit shall be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.
For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up annuity benefit provided under the contract arising from considerations paid prior to the time the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit, but the present value of a paid-up annuity benefit shall be not less than the minimum nonforfeiture amount at that time.
For the purpose of determining the benefits calculated under subs. (6)
, in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's 70th birthday or the 10th anniversary of the contract, whichever is later.
Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.
Any paid-up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.
For any contract which provides within the same contract, by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding subs. (5)
, additional benefits payable in the event of total and permanent disability, as reversionary annuity or deferred reversionary annuity benefits or as other policy benefits additional to life insurance, endowment and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this section. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.
This section does not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship), an employee organization or both (other than a plan providing individual retirement accounts or individual retirement annuities under section 408 of the U.S. internal revenue code, as now or hereafter amended), premium deposit fund, variable annuity, investment annuity, immediate annuity, deferred annuity contract after annuity payments have commenced, reversionary annuity or any contract which is delivered outside this state through an agent or other representative of the company issuing the contract.
Required provisions in life insurance. 632.44(1)(1)
Every life insurance policy shall specify separately each benefit promised in the policy.
(2) Grace period.
Every life insurance policy other than a group policy shall contain a provision entitling the policyholder to a grace period of not less than 31 days for the payment of any premium due except the first, during which the death benefit shall continue in force.
Individual credit life insurance policies shall be for nonrenewable, nonconvertible, term insurance. This restriction does not apply when evidence of insurability is required nor when the credit transaction is for more than 5 years.
When the insured debtor has paid or has made an obligation to pay all or any part of the premium under an individual credit life insurance policy, the total charge to the debtor shall be shown in the policy issued to the insured debtor. However, the rate of charge to the debtor rather than the total charge may be shown where the indebtedness is variable from period to period and the premium is computed periodically on the outstanding balance. The policy shall contain provision for cancellation of insurance upon termination of indebtedness through prepayment and shall provide for a refund of any unearned charge to the debtor, computed on a formula filed with the commissioner.
The insurer shall fully control and be responsible for the settlement or adjustment of all claims.
History: 1975 c. 375
See also ss. Ins 2.05
, and 3.26
, Wis. adm. code.
Contracts providing variable benefits. 632.45(1)(1)
Any contract issued under s. 611.25
or under any section of chs. 600
incorporating s. 611.25
by reference which provides for payment of benefits in variable amounts shall contain a statement of the essential features of the procedure to be followed by the insurer in determining the dollar amount of the variable benefits. It shall contain appropriate nonforfeiture benefits in lieu of those under s. 632.43
and a grace provision appropriate to such a contract in lieu of the provision required by s. 632.44
. Any such individual contract and any such certificate issued under a group contract shall state that the dollar amount may decrease or increase and shall conspicuously display on its first page a statement that the benefits thereunder are on a variable basis, with a statement where in the contract the details of the variable provisions may be found.
Any contract under sub. (1)
shall state whether it may be amended as to investment policy, voting rights, and conduct of the business and affairs of any segregated account. Subject to any preemptive provision of federal law, any such amendment is subject to filing under s. 631.20
and approval by a majority of the policyholders in the segregated account.
(3) Marketing plan.
Contracts under sub. (1)
, if they are not forms, may be issued only within the terms of a general marketing plan approved by the commissioner. The marketing plan shall be designed to protect the interests of the policyholders in regard to any voting rights and operation of the segregated account and amendment of the contract.
Incontestability and misstated age. 632.46(1)(1)
Incontestability of individual policies.
Except under sub. (3)
or for nonpayment of premiums, no individual life insurance policy may be contested after it has been in force from the date of issue for 2 years during the lifetime of the person whose life is at risk.
(2) Incontestability of group policies.
Except under sub. (3)
or for nonpayment of premiums, no group life insurance policy may be contested after it has been in force for 2 years from its date of issue and no coverage of any insured thereunder may be contested on the basis of a statement made by the insured relative to his or her insurability after the coverage has been in force on the insured for 2 years during the lifetime of the insured. No such statement may be used to contest coverage unless contained in a written instrument signed by the insured person.
Subject to par. (b)
, if the age or sex of the person whose life is at risk is misstated in an application for a policy of life insurance and the error is not adjusted during the person's lifetime the amount payable under the policy is what the premium paid would have purchased if the age or sex had been stated correctly.
If the person whose life is at risk was, at the time the insurance was applied for, beyond the maximum age limit designated by the insurer, the insurer shall refund at least the amount of the premiums collected under the policy.
(4) Disability coverages and additional accident benefits.
Despite subs. (1)
, disability coverages and additional accident benefits may be contested at any time on the ground of fraudulent misrepresentation.
History: 1975 c. 373
; 1979 c. 102
Assignment of life insurance rights. 632.47(1)(1)
Except as provided in sub. (3)
, the owner of any rights under a life insurance policy or annuity contract may assign any of those rights, including any right to designate a beneficiary and the rights secured under s. 632.57
or any other statute. An assignment valid under general contract law vests the assigned rights in the assignee subject, so far as reasonably necessary for the protection of the insurer, to any provisions in the insurance policy or annuity contract inserted to protect the insurer against double payment or obligation.
(2) Relative rights of assignee and beneficiary.
The rights of a beneficiary under a life insurance policy or annuity contract are subordinate to those of an assignee, unless the beneficiary was effectively designated as an irrevocable beneficiary prior to the assignment.
(3) Prohibition on assignment.
Assignment may be expressly prohibited by any of the following:
A group contract providing annuities as retirement benefits.
An annuity contract that is subject to transferability restrictions under any federal or state tax, employee benefit or securities law.
History: 1975 c. 373
; 1999 a. 30
Life insurance policy loans. 632.475(1)(a)
“Policy" includes a life insurance policy, a certificate issued by a fraternal benefit society and an annuity contract.
“Policy loan" means a loan by an insurer, including a premium loan, secured by the cash surrender value of a policy issued by the insurer.
“Policy year" means a year beginning on the anniversary date of a policy.
(2) Interest rates.
A policy providing for policy loans shall contain a provision for a maximum interest rate on the loans in accordance with one but not both of the following:
A provision permitting an adjustable maximum rate established from time to time by the insurer.
A provision permitting a specified rate not exceeding 12 percent per year.
(3) Adjustable maximum rate.
The rate of interest charged on a policy loan under sub. (2) (a)
shall not exceed the higher of the following:
The rate used to compute the cash surrender values under the policy during the applicable period plus 1 percent per year.
Moody's corporate bond yield monthly average, as published by Moody's Investors Service, Inc., or its successor, for the month ending 2 months before the rate is applied. If the monthly average is no longer published, a comparable average shall be substituted by the commissioner by rule.
(4) Frequency of changes.
If the maximum rate of interest is determined under sub. (2) (a)
the policy shall contain a provision setting forth the frequency at which the rate is to be determined for that policy.
(5) Intervals and limits on changes.
The maximum rate of interest for a policy subject to sub. (2) (a)
shall be determined at regular intervals at least once every 12 months, but not more frequently than once in any 3-month period. At the intervals specified in the policy:
The rate being charged may be changed as permitted under sub. (3)
but no such change shall be less than 0.5 percent per year; and
The rate being charged must be reduced to or below the maximum rate as determined under sub. (3)
whenever the maximum is lower than the rate being charged by 0.5 percent or more per year.
Notify the policyholder of the initial rate of interest on the loan at the time a policy loan is made, if the loan is not a premium loan.
Notify the policyholder with respect to premium loans of the initial rate of interest on the loan as soon as it is reasonably practical to do so after making the initial loan. Notice need not be given to the policyholder when a further premium loan is added, except as provided in par. (c)
Send to policyholders with loans 30 days' advance notice of any increase in the interest rate.
(7) Coverage continuation.
No policy may terminate in a policy year as the sole result of a change in the loan interest rate during that policy year. The insurer shall maintain coverage until it would have terminated if there had been no change.
(8) Policy provisions.
The pertinent provisions of subs. (2)
shall be set forth in substance in the policies to which they apply.
Designation of beneficiary. 632.48(1)(1)
Powers of policyholders.
Subject to s. 632.47 (2)
, no life insurance policy or annuity contract may restrict the right of a policyholder or certificate holder:
Irrevocable designation of beneficiary.
To make at any time an irrevocable designation of beneficiary effective at once or at some subsequent time; or
Change of beneficiary.
If the designation of beneficiary is not explicitly irrevocable, to change the beneficiary without the consent of the previously designated beneficiary. Subject to s. 853.17
, as between the beneficiaries, any act that unequivocally indicates an intention to make the change is sufficient to effect it.
(2) Protection of insurer.
An insurer may prescribe formalities to be complied with for the change of beneficiaries, but formalities prescribed under this subsection shall be designed only for the protection of the insurer. The insurer discharges its obligation under the insurance policy or certificate of insurance if it pays a properly designated beneficiary unless it has actual notice of either an assignment or a change in beneficiary designation made under sub. (1) (b)
. It has actual notice if the prescribed formalities are complied with or if the change in beneficiary has been requested in the form prescribed by the insurer and delivered to an intermediary representing the insurer.
(3) Notice of changes.
An insurer that receives a request from the department of health services under s. 49.47 (4) (cr) 2.
for notification shall comply with the request and notify the department of any changes to or payments made under the annuity contract to which the request for notification relates.
Legislative Council Note, 1979: The amendment to sub. (2) adds a situation in which the insured has acted reasonably in dealing with a representative of the insurer. As between the insurer and the insured, the burden should fall upon the insurer if the agent makes an error of this kind. The insurer, of course, may have a cause of action against its agent. [Bill 20-S]
Under the facts of the case, the decedent's oral instruction to his attorney to change a beneficiary was a sufficient “act" under sub. (1) (b) even though the new beneficiary was not designated with sufficient specificity. Empire General Life Insurance v. Silverman, 135 Wis. 2d 143
, 399 N.W.2d 910
Estoppel from medical examination.
If under the rules of any insurer issuing life insurance, its medical examiner has authority to issue a certificate of health, or to declare the proposed insured acceptable for insurance, and so reports to the insurer or its agent, the insurer is estopped to set up in defense of an action on the policy issued thereon that the proposed insured was not in the condition of health required by the policy at the time of issue or delivery, or that there was a preexisting condition not noted in the certificate or report, unless the certificate or report was procured through the fraudulent misrepresentation or nondisclosure by the applicant or proposed insured.
History: 1975 c. 375
Estoppel under this section may apply against insurers who seek a medical examiner's opinion regarding fitness for insurance without establishing any formal rules regarding the examiner's authority. Grosse v. Protective Life Insurance Co. 182 Wis. 2d 97
, 513 N.W.2d 592
Required group life insurance provisions.
Every group life insurance policy shall contain the following:
(1) Evidence of insurability.
A provision setting forth any conditions under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of that coverage.
(2) Misstatement of age.
A provision specifying that an equitable adjustment of premiums or of benefits or of both will be made if the age of an insured person has been misstated and clearly stating the method of adjustment.
(3) Facility of payment.
A provision that any sum becoming due by reason of the death of an insured person is payable to the beneficiary designated by the insured person, subject to policy provisions if there is no designated beneficiary, and to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of the sum not exceeding $1,000 to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the insured person. This subsection does not apply to a policy issued to a creditor to insure his or her debtors.
If it is not term insurance, equitable nonforfeiture provisions, but they need not be the same provisions as are in individual policies.
(5) Grace period.
A provision that the policyholder is entitled to a grace period of not less than 31 days for the payment of any premium due except the first. During the grace period the death benefit coverage shall continue in force, unless the policyholder gives the insurer advance written notice of discontinuance in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer for the payment of a proportional premium for the time the policy was in force during the grace period.
History: 1975 c. 375
; 1979 c. 110
s. 60 (11)
Conversion option in group and franchise life insurance. 632.57(1)(1)
Scope of application.
This section applies to all group life insurance policies other than credit life insurance policies and applies to franchise life insurance policies providing term insurance renewable only while the insured is a member of the franchise unit.
(2) Conversion right upon loss of eligibility.
If the insurance, or any portion of it, on a person insured under a policy covered by this section ceases because of termination of employment or of membership in the class or franchise unit eligible for coverage, the insurer shall, upon written application and payment of the first premium within 31 days after the termination, issue to the person, without evidence of insurability, an individual policy providing benefits reasonably similar in type and amount to those of the group or franchise insurance, but which need not include disability or other supplementary benefits.