                                 CODE OF VIRGINIA

NONFORFEITURE BENEFITS AND CASH SURRENDER VALUES IN LIFE POLICIES ISSUED PRIOR
TO OPERATIVE DATE STATED IN § 38.2-3214 (§ 38.2-3200)

A. This section shall apply only to life insurance policies issued prior to the
operative date stated in &#xA7; 38.2-3214.

B. The nonforfeiture benefit referred to in &#xA7; 38.2-3309 shall be available
to the insured in the event of default in premium payments, after premiums have
been paid for three full years. The premium paid for the insured under any
policy provision shall not be considered in default. The nonforfeiture benefit
shall be a stipulated form of insurance, effective from the due date of the
defaulted premium, the net value of which shall at least equal the reserve at
the date of default on the policy and on any dividend additions to the policy,
exclusive of the reserve on account of return premium insurance and on total and
permanent disability and additional accidental death benefits, less a sum not
more than 2 1/2 percent of the amount insured by the policy and of any dividend
additions to the policy and less any existing indebtedness to the insurer on or
secured by the policy. The policy shall specify the mortality table and rate of
interest used in computing these reserves. Instead of allowing a deduction from
the reserve of a sum not more than 2 1/2 percent of the amount insured by the
policy, and of any dividend additions to the policy, the insurer may insert in
the policy a provision that one-fifth of the reserve may be deducted, or may
provide in the policy that a deduction may be made of 2 1/2 percent of the
amount insured by the policy or one-fifth of the reserve, at the insurer&#8217;s
option. The cash surrender value referred to in &#xA7; 38.2-3309 shall be
available upon surrender of the policy to the insurer within one month of the
due date of the defaulted premium and shall at least equal the sum which would
otherwise be available for the purchase of insurance. The insurer may defer
payment for not more than three months after the application for the cash
surrender value is made.

C. If more than one option is provided, the policy shall stipulate which of the
options shall be effective if the insured does not elect any option on or before
the expiration of the grace period allowed for the payment of the premium.

D. A provision may also be inserted in the policy that in the event of default
in a premium payment before the options become available, the reserve on any
dividend additions then in force may, at the insurer&#8217;s option, be paid in
cash or applied as a net premium to the purchase of paid-up term insurance for
any amount not exceeding the face amount of the original policy.

E. This section shall apply to term insurance policies only if the term is for
more than twenty years.

HISTORY: Code 1950, § 38-374; 1952, c. 317, § 38.1-459; 1986, c. 562.