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AN ACT concerning life insurance; payment of certain amounts; amend-
  ing K.S.A. 40-427, 40-428, 40-428a and 40-429 and repealing the ex-
  isting sections.
Be it enacted by the Legislature of the State of Kansas:
  Section 1.  K.S.A. 40-427 is hereby amended to read as follows: 40-
427. (a) This subsection shall apply only to policies of life insurance (other
than industrial life insurance) issued prior to the operative date of K.S.A.
40-428 (the standard nonforfeiture law) July 1, 1947.
  The nonforfeiture benefits referred to in subsection (6) of K.S.A. 40-
420 and amendments thereto, shall be available to the insured in event of
default in premium payments, after premiums shall have been paid for
three years, and shall be a stipulated form of insurance, effective from
the due date of the defaulted premium, the net value of which shall be
at least equal to the reserve at the date of default on the policy and on
dividend additions thereto, if any, exclusive of the reserve on account of
return premium insurance and on total and permanent disability and ad-
ditional accidental death benefits (the policy to specify the mortality table
and rate of interest adopted for computing such reserves), less a per-
 centage (not more than two and one-half) 21/2% of the amount insured
by the policy and of existing dividend additions thereto, if any, and less
any existing indebtedness to the company on or secured by the policy:
Provided, That. The policy may be surrendered to the company at its
home office within one month of the due date of defaulted premium for
a specific cash value at least equal to the sum which would otherwise be
available for the purchase of insurance as aforesaid: Provided further,
That. The company may defer payment for not more than six months 30
days after the application therefor is made. This subsection shall not apply
to term insurance of twenty 20 years or less. The policy may also specify
that in event of default in a premium payment before the options become
available the reserve on any dividend additions then in force may at the
option of the company be paid in cash or applied as a net premium to
the purchase of paid-up term insurance for any amount not in excess of
the face of the original policy.
  (b)  This subsection shall apply only to policies of industrial life in-
surance issued prior to the operative date of K.S.A. 40-428 (the standard
nonforfeiture law) July 1, 1947.
  The nonforfeiture benefits referred to in section (7) of K.S.A. 40-423
and amendments thereto, shall be available in event of default in premium
payments after premiums shall have been paid for five full years and shall
be a stipulated form of insurance effective from the due date of the de-
faulted premium, the net value of which shall not be less than the reserve
on the policy at the end of the last completed quarter of the policy year
for which premiums have been paid, and all dividend additions thereto,
if any, exclusive of any reserve on total and permanent disability and
additional accidental death benefits (the policy to specify the mortality
table, rate of interest, and method of valuation adopted for computing
such reserve), less a maximum percentage (not more than two and one-
 half percentum) 21/2% of the amount insured by the policy and of existing
dividend additions thereto, if any, and less any existing indebtedness to
the company on or secured by the policy. The policy shall also specify
said the percentage, or other rule of calculation so as to permit deter-
mination of the values, to be specified for each year for which required
values are not included in the policy. The cash surrender value referred
to in subsection (9) of K.S.A. 40-423 and amendments thereto, shall be
available upon surrender of the policy to the company at its home office
within the period of grace after the due date of the defaulted premium
and shall be equal to the net value of the stipulated form of insurance
otherwise available: Provided, That. The company may defer payment for
not more than six months 30 days after the application therefor is made.
After premiums have been paid for five full years the cash surrender value
at any time of any stipulated form of insurance shall be the full reserve
at the date of surrender.
  Sec. 2.  K.S.A. 40-428 is hereby amended to read as follows: 40-428.
  (a) In the case of policies issued on or after the operative date of this
section, as defined in subsection (d-1), (d-2), (d-3) or (i) July 1, 1947, no
policy of life insurance, except as stated in subsection (h) shall be deliv-
ered or issued for delivery in this state unless it shall contain in substance
the following provisions, or corresponding provisions which in the opinion
of the commissioner of insurance are at least as favorable to the defaulting
or surrendering policyholder as are the minimum requirements herein-
after specified in this section and are essentially in compliance with sub-
section (g) of this section.
  (i)  In the event of default in any premium payment, the company will
grant, upon proper request not later than 60 days after the due date of
the premium in default, a paid-up nonforfeiture benefit on a plan stipu-
lated in the policy, effective as of such due date, of such amount as may
be hereinafter specified in this section.
  In lieu of such stipulated paid-up nonforfeiture benefit, the company
may substitute, upon proper request not later than 60 days after the due
date of the premium in default, an actuarially equivalent alternative paid-
up nonforfeiture benefit which provides a greater amount or longer pe-
riod of death benefits or, if applicable, a greater amount or earlier pay-
ment of endowment benefits.
  (ii)  Upon surrender of the policy within 60 days after the due date of
any premium payment in default after premiums have been paid for at
least three full years in the case of ordinary insurance or five full years in
the case of industrial insurance, the company will shall pay, in lieu of any
paid-up nonforfeiture benefit, a cash surrender value of such amount as
may be hereinafter specified in this section.
  (iii)  A specified paid-up nonforfeiture benefit shall become effective
as specified in the policy unless the person entitled to make such election
elects another available option not later than 60 days after the due date
of the premium in default.
  (iv)  If the policy shall have become paid-up by completion of all pre-
mium payments or if it is continued under any paid-up nonforfeiture
benefit which became effective on or after the third policy anniversary in
the case of ordinary insurance or the fifth policy anniversary in the case
of industrial insurance, the company will pay, upon surrender of the policy
within 30 days after any policy anniversary, a cash surrender value of such
amount as may be hereinafter is specified in this section.
  (v)  In the case of policies which cause on a basis guaranteed in the
policy unscheduled changes in benefits or premiums, or which provide
an option for changes in benefits or premiums other than a change to a
new policy, a statement of the mortality table, interest rate, and method
used in calculating cash surrender values and the paid-up nonforfeiture
benefits available under the policy. In the case of all other policies, a
statement of the mortality table and interest rate used in calculating the
cash surrender values and the paid-up nonforfeiture benefits available
under the policy, together with a table showing the cash surrender value,
if any, and paid-up nonforfeiture benefit, if any, available under the policy
on each policy anniversary either during the first 20 policy years or during
the term of the policy, whichever is shorter, such values and benefits to
be calculated upon the assumption that there are no dividends or paid-
up additions credited to the policy and that there is no indebtedness to
the company on the policy.
  (vi)  A statement that the cash surrender values and the paid-up non-
forfeiture benefits available under the policy are not less than the mini-
mum values and benefits required by or pursuant to any statute of the
state in which the policy is delivered; and an explanation of the manner
in which the cash surrender values and the paid-up nonforfeiture benefits
are altered by the existence of any paid-up additions credited to the policy
or any indebtedness to the company on the policy; if a detailed statement
of the method of computation of the values and benefits shown in the
policy is not stated therein, a statement that such method of computation
has been filed with the insurance supervisory official of the state in which
the policy is delivered; and, a statement of the method to be used in
calculating the cash surrender value and paid-up nonforfeiture benefit
available under the policy on any policy anniversary beyond the last an-
niversary for which such values and benefits are consecutively shown in
the policy.
  Any of the foregoing provisions or portions thereof not applicable by
reason of the plan of insurance may, to the extent inapplicable, be omitted
from the policy with the consent of the insurance commissioner.
  The company shall reserve the right to defer the payment of any cash
surrender value for a period of six months 30 days after demand therefor
with surrender of the policy.
  (b)  Any cash surrender value available under the policy in the event
of default in a premium payment due on any policy anniversary, whether
or not required by subsection (a), shall be an amount not less than the
excess, if any, of the present value, on such anniversary, of the future
guaranteed benefits which would have been provided for by the policy,
including any existing paid-up additions, if there had been no default,
over the sum of: (i) The then present value of the adjusted premiums as
defined in subsections (d), (d-1), (d-2) and (d-3), corresponding to pre-
miums which would have fallen due on and after such anniversary; and
(ii) the amount of any indebtedness to the company on the policy.
  For any policy issued on or after the operative date of subsection (d-
3) as defined therein, which provides supplemental life insurance or an-
nuity benefits at the option of the insured and for an identifiable addi-
tional premium by rider or supplemental policy provision, the cash
surrender value referred to in the first paragraph of this subsection shall
be an amount not less than the sum of the cash surrender value as defined
in such paragraph for an otherwise similar policy issued at the same age
without such rider or supplemental policy provision and the cash surren-
der value as defined in such paragraph for a policy which provides only
the benefits otherwise provided by such rider or supplemental policy
provision.
  For any family policy issued on or after the operative date of subsection
(d-3) as defined therein, which defines a primary insured and provides
term insurance on the life of the spouse of the primary insured expiring
before the spouse's age 71, the cash surrender value referred to in the
first paragraph of this subsection shall be an amount not less than the
sum of the cash surrender value as defined in such paragraph for an
otherwise similar policy issued at the same age without such term insur-
ance on the life of the spouse and the cash surrender value as defined in
such paragraph for a policy which provides only the benefits otherwise
provided by such term insurance on the life of the spouse.
  Any cash surrender value available within 30 days after any policy an-
niversary under any policy paid-up by completion of all premium pay-
ments or any policy continued under any paid-up nonforfeiture benefit,
whether or not required by subsection (a), shall be an amount not less
than the present value, on such anniversary, of the future guaranteed
benefits provided for by the policy, including any existing paid-up addi-
tions, decreased by any indebtedness to the company on the policy.
  (c)  Any paid-up nonforfeiture benefit available under the policy in
the event of default in a premium payment due on any policy anniversary
shall be such that its present value as of such anniversary shall be at least
equal to the cash surrender value then provided for by the policy, or, if
none is provided for, that cash surrender value which would have been
required by this section in the absence of the condition that premiums
shall have been paid for at least a specified period.
  (d)  This subsection (d) shall not apply to policies issued on and after
the operative date of subsection (d-3), as defined therein. Except as pro-
vided in the third paragraph of this subsection, the adjusted premiums
for any policy shall be calculated on an annual basis and shall be such
uniform percentage of the respective premiums specified in the policy
for each policy year, excluding amounts stated in the policy as extra pre-
miums to cover impairments or special hazards, that the present value,
at the date of issue of the policy, of all such adjusted premiums shall be
equal to the sum of: (i) The then present value of the future guaranteed
benefits provided for by the policy; (ii) two percent of the amount of
insurance, if the insurance be uniform in amount, or of the equivalent
uniform amount, as hereinafter defined, if the amount of insurance varies
with duration of the policy; (iii) forty percent 40% of the adjusted pre-
mium for the first policy year; (iv) twenty-five percent 25% of either the
adjusted premium for the first policy year or the adjusted premium for a
whole life policy of the same uniform or equivalent uniform amount with
uniform premiums for the whole life issued at the same age for the same
amount of insurance, whichever is less. In applying the percentages spec-
ified in (iii) and (iv) above, no adjusted premium shall be deemed to
exceed 4% of the amount of insurance or uniform amount equivalent
thereto. The date of issue of a policy for the purpose of this subsection
shall be the date as of which the rated age of the insured is determined.
  In the case of a policy providing an amount of insurance varying with
duration of the policy, the equivalent uniform amount thereof for the
purpose of this subsection shall be deemed to be the uniform amount of
insurance provided by an otherwise similar policy, containing the same
endowment benefit or benefits, if any, issued at the same age and for the
same term, the amount of which does not vary with duration and the
benefits under which have the same present value at the date of issue as
the benefits under the policy. In the case of a policy issued at an age less
than 10 years the equivalent uniform amount of insurance may be based
upon the amount of insurance after age 10.
  The adjusted premiums for any policy providing term insurance ben-
efits by rider or supplemental policy provision shall be equal to (a) the
adjusted premiums for an otherwise similar policy issued at the same age
without such term insurance benefits, increased, during the period for
which premiums for such term insurance benefits are payable, by (b) the
adjusted premiums for such term insurance, the foregoing items (a) and
  (b) being calculated separately and as specified in the first two paragraphs
of this subsection except that, for the purposes of (ii), (iii) and (iv) of the
first such paragraph, the amount of insurance or equivalent uniform
amount of insurance used in the calculation of the adjusted premiums
referred to in (b) shall be equal to the excess of the corresponding amount
determined for the entire policy over the amount used in the calculation
of the adjusted premiums in (a).
  Except as otherwise provided in subsections (d-1) and (d-2), all ad-
justed premiums and present values referred to in this section shall for
all policies of ordinary insurance be calculated on the basis of the com-
missioners' 1941 standard ordinary mortality table. For any category of
ordinary insurance issued on female risks, adjusted premiums and present
values may be calculated, according to an age not more than three years
younger than the actual age of the insured. Such calculations for all pol-
icies of industrial insurance shall be made on the basis of the 1941 stan-
dard industrial mortality table. All calculations shall be made on the basis
 of the rate of interest, not exceeding 31/2% per annum, specified in the
policy for calculating cash surrender values and paid-up nonforfeiture
benefits. In calculating the present value of any paid-up term insurance
with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than 130% of
the rates of mortality according to such applicable table. If the rate of
mortality used exceeds 100% the rate shall be stated in the policy. For
insurance issued on a substandard basis, the calculation of any such ad-
justed premiums and present values may be based on such other table of
mortality as may be specified by the company and approved by the com-
missioner of insurance.
  (d-1)  This subsection (d-1) shall not apply to ordinary policies issued
on or after the operative date of subsection (d-3), as defined therein. In
the case of ordinary policies issued on or after the operative date of this
subsection (d-1) as defined herein, all adjusted premiums, as defined in
subsection (d), and present values referred to in this section shall be
calculated on the basis of the commissioners' 1958 standard ordinary mor-
tality table and the rate of interest specified in the policy for calculating
cash surrender values and paid-up nonforfeiture benefits. Such rate of
 interest shall not exceed 31/2% per annum, except that a rate of interest
not exceeding 4% per annum may be used for policies issued on or after
July 1, 1973, and prior to July 1, 1978, and a rate of interest not exceeding
 51/2% per annum may be used for policies issued on or after July 1, 1978,
except that for any single premium whole life or endowment insurance
 policy a rate of interest not exceeding 61/2% per annum may be used. For
any category of ordinary insurance issued on female risks, adjusted pre-
miums and present values may be calculated according to an age not more
than six years younger than the actual age of the insured. In calculating
the present value of any paid-up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit, the rates of mor-
tality assumed may be not more than those shown in the commissioners'
1958 extended term insurance table. For insurance issued on a substan-
dard basis, the calculation of any such adjusted premiums and present
values may be based on such other table of mortality as may be specified
by the company and approved by the commissioner.
  After the effective date of this subsection (d-1), any company may file
with the commissioner a written notice of its election to comply with the
provisions of this subsection after a specified date. After the filing of such
notice, then upon such specified date (which shall be the operative date
of this subsection for such company), this subsection shall become op-
erative with respect to the ordinary policies thereafter issued by such
company. Any company, having filed such notice of election to comply
with this subsection, and desiring to withdraw from such election as to
future policies may file with the commissioner of insurance a written
notice of such withdrawal after a specified date, and of its intention to
value all its future policies in accordance with the provisions of law ap-
plicable to the basis used prior to such election and to provide nonfor-
feiture benefits and cash surrender values in future policies as required
for the basis used prior to such election.
  (d-2)  This subsection (d-2) shall not apply to industrial policies issued
on or after the operative date of subsection (d-3), as defined therein. In
the case of industrial policies issued on or after the operative date of this
subsection (d-2) as defined herein, all adjusted premiums and present
values referred to in this section shall be calculated on the basis of the
commissioners' 1961 standard industrial mortality table and the rate of
interest specified in the policy for calculating cash surrender values and
paid-up nonforfeiture benefits. Such rate of interest shall not exceed
 31/2% per annum, except that a rate of interest not exceeding 4% per
annum may be used for policies issued on or after July 1, 1973, and prior
 to July 1, 1978, and a rate of interest not exceeding 51/2% per annum may
be used for policies issued on or after July 1, 1978, except that for any
single premium whole life or endowment insurance policy a rate of in-
 terest not exceeding 61/2% per annum may be used. In calculating the
present value of any paid-up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit, the rates of mor-
tality assumed may be not more than those shown in the commissioners'
1961 industrial extended term insurance table. For insurance issued on
a substandard basis, the calculations of such adjusted premiums and pres-
ent values may be based on such other table of mortality as may be spec-
ified by the company and approved by the commissioner.
  After the effective date of this subsection (d-2), any company may file
with the commissioner a written notice of its election to comply with the
provisions of this subsection after a specified date. After the filing of such
notice, then upon such specified date (which shall be the operative date
of this subsection for such company), this subsection shall become op-
erative with respect to the industrial policies thereafter issued by such
company. Any company having filed such notice of election to comply
with this subsection, and desiring to withdraw from such election as to
future policies may file with the commissioner of insurance a written
notice of such withdrawal after a specified date, and of its intention to
value all its future policies in accordance with provisions of law applicable
to the basis used prior to such elections and to provide nonforfeiture
benefits and cash surrender values in future policies as required for the
basis used prior to such election.
  (d-3) (1)  This subsection shall apply to all policies issued on or after
the operative date of this subsection (d-3), as defined herein. Except as
provided in the seventh paragraph of this subsection, the adjusted pre-
miums for any policy shall be calculated on an annual basis and shall be
such uniform percentage of the respective premiums specified in the
policy for each policy year, excluding amounts payable as extra premiums
to cover impairments or special hazards and also excluding any uniform
annual contract charge or policy fee specified in the policy in a statement
of the method to be used in calculating the cash surrender values and
paid-up nonforfeiture benefits, that the present value, at the date of issue
of the policy, of all adjusted premiums shall be equal to the sum of: (i)
The then present value of the future guaranteed benefits provided for by
the policy; (ii) one percent of either the amount of insurance, if the in-
surance be uniform in amount, or the average amount of insurance at the
beginning of each of the first 10 policy years; and (iii) one hundred
twenty-five percent 125% of the nonforfeiture net level premium as here-
inafter defined. In applying the percentage specified in (iii) above, no
nonforfeiture net level premium shall be deemed to exceed 4% of either
the amount of insurance, if the insurance be uniform in amount, or the
average amount of insurance at the beginning of each of the first 10 policy
years. The date of issue of a policy for the purpose of this subsection shall
be the date as of which the rated age of the insured is determined.
  (2)  The nonforfeiture net level premium shall be equal to the present
value, at the date of issue of the policy, of the guaranteed benefits pro-
vided for by the policy divided by the present value, at the date of issue
of the policy, of an annuity of one per annum payable on the date of issue
of the policy and on each anniversary of such policy on which a premium
falls due.
  (3)  In the case of policies which cause on a basis guaranteed in the
policy unscheduled changes in benefits or premiums, or which provide
an option for changes in benefits or premiums other than a change to a
new policy, the adjusted premiums and present values shall initially be
calculated on the assumption that future benefits and premiums do not
change from those stipulated at the date of issue of the policy. At the
time of any such change in the benefits or premiums the future adjusted
premiums, nonforfeiture net level premiums and present values shall be
recalculated on the assumption that future benefits and premiums do not
change from those stipulated by the policy immediately after the change.
  (4)  Except as otherwise provided in the seventh paragraph of this
subsection, the recalculated future adjusted premiums for any such policy
shall be such uniform percentage of the respective future premiums spec-
ified in the policy for each policy year, excluding amounts payable as extra
premiums to cover impairments and special hazards, and also excluding
any uniform annual contract charge or policy fee specified in the policy
in a statement of the method to be used in calculating the cash surrender
values and paid-up nonforfeiture benefits, that the present value, at the
time of change to the newly defined benefits or premiums, of all such
future adjusted premiums shall be equal to the excess of (A) the sum of
  (i) the then present value of the then future guaranteed benefits provided
for by the policy and (ii) the additional expense allowance, if any, over
(B) the then cash surrender value, if any, or present value of any paid-up
nonforfeiture benefit under the policy.
  (5)  The additional expense allowance, at the time of the change to
the newly defined benefits or premiums, shall be the sum of: (i) One
percent of the excess, if positive, of the average amount of insurance at
the beginning of each of the first 10 policy years subsequent to the change
over the average amount of insurance prior to the change at the beginning
of each of the first 10 policy years subsequent to the time of the most
recent previous change, or, if there has been no previous change, the date
of issue of the policy; and (ii) one hundred twenty-five percent 125% of
the increase, if positive, in the nonforfeiture net level premium.
  (6)  The recalculated nonforfeiture net level premium shall be equal
to the result obtained by dividing (A) by (B) where (A) equals the sum
of: (i) The nonforfeiture net level premium applicable prior to the change
times the present value of an annuity of one per annum payable on each
anniversary of the policy on or subsequent to the date of the change on
which a premium would have fallen due had the change not occurred;
and (ii) the present value of the increase in future guaranteed benefits
provided for by the policy, and
  (B)  Equals the present value of an annuity of one per annum payable
on each anniversary of the policy on or subsequent to the date of change
on which a premium falls due.
  (7)  Notwithstanding any other provisions of this subsection to the
contrary, in the case of a policy issued on a substandard basis which
provides reduced graded amounts of insurance so that, in each policy
year, such policy has the same tabular mortality cost as an otherwise
similar policy issued on the standard basis which provides higher uniform
amounts of insurance, adjusted premiums and present values for such
substandard policy may be calculated as if it were issued to provide such
higher uniform amounts of insurance on the standard basis.
  (8)  All adjusted premiums and present values referred to in this sec-
tion shall for all policies of ordinary insurance be calculated on the basis
of: (i) The commissioners' 1980 standard ordinary mortality table; or (ii)
at the election of the company for any one or more specified plans of life
insurance, the commissioners' 1980 standard ordinary mortality table with
ten-year select mortality factors; shall for all policies of industrial insur-
ance be calculated on the basis of the commissioners' 1961 standard in-
dustrial mortality table; and shall for all policies issued in a particular
calendar year be calculated on the basis of a rate of interest not exceeding
the nonforfeiture interest rate as defined in this subsection for policies
issued in that calendar year. Except:
  (A)  At the option of the company, calculations for all policies issued
in a particular calendar year may be made on the basis of a rate of interest
not exceeding the nonforfeiture interest rate, as defined in this subsec-
tion, for policies issued in the immediately preceding calendar year.
  (B)  Under any paid-up nonforfeiture benefit, including any paid-up
dividend additions, any cash surrender value available, whether or not
required by subsection (a), shall be calculated on the basis of the mortality
table and rate of interest used in determining the amount of such paid-
up nonforfeiture benefit and paid-up dividend additions, if any.
  (C)  A company may calculate the amount of any guaranteed paid-up
nonforfeiture benefit including any paid-up additions under the policy on
the basis of an interest rate no lower than that specified in the policy for
calculating cash surrender values.
  (D)  In calculating the present value of any paid-up term insurance
with accompanying pure endowment, if any, offered as a nonforfeiture
benefit, the rates of mortality assumed may be not more than those shown
in the commissioners' 1980 extended term insurance table for policies of
ordinary insurance and not more than the commissioners' 1961 industrial
extended term insurance table for policies of industrial insurance.
  (E)  For insurance issued on a substandard basis, the calculation of
any such adjusted premiums and present values may be based on appro-
priate modifications of the aforementioned tables.
  (F)  Any ordinary mortality tables, adopted after 1980 by the national
association of insurance commissioners, that are approved by regulation
promulgated by the commissioner for use in determining the minimum
nonforfeiture standard may be substituted for the commissioners' 1980
standard ordinary mortality table with or without ten-year select mortality
factors or for the commissioners' 1980 extended term insurance table.
  (G)  Any industrial mortality tables, adopted after 1980 by the national
association of insurance commissioners, that are approved by regulation
promulgated by the commissioner for use in determining the minimum
nonforfeiture standard may be substituted for the commissioners' 1961
standard industrial mortality table or the commissioners' 1961 industrial
extended term insurance table.
  (9)  The nonforfeiture interest rate per annum for any policy issued
in a particular calendar year shall be equal to 125% of the calendar year
statutory valuation interest rate for such policy as defined in the standard
valuation law, rounded to the nearer 1/4%.
  (10)  Notwithstanding any other provision of this code to the contrary,
any refiling of nonforfeiture values or their methods of computation for
any previously approved policy form which involves only a change in the
interest rate or mortality table used to compute nonforfeiture values shall
not require refiling of any other provisions of that policy form.
  (11)  After the effective date of this subsection (d-3), any company
may file with the commissioner a written notice of its election to comply
with the provisions of this subsection after a specified date before January
1, 1989, which shall be the operative date of this subsection for such
company. If a company makes no such election, the operative date of this
subsection for such company shall be January 1, 1989.
  (e)  In the case of any plan of life insurance which provides for future
premium determination, the amounts of which are to be determined by
the insurance company based on then estimates of future experience, or
in the case of any plan of life insurance which is of such a nature that
minimum values cannot be determined by the methods described in sub-
sections (a), (b), (c), (d), (d-1), (d-2) or (d-3) herein, then:
  (1)  The commissioner must be satisfied that the benefits provided
under the plan are substantially as favorable to policyholders and insureds
as the minimum benefits otherwise required by subsections (a), (b), (c),
  (d), (d-1), (d-2) or (d-3) herein;
  (2)  the commissioner must be satisfied that the benefits and the pat-
tern of premiums of that plan are not such as to mislead prospective
policyholders or insureds;
  (3)  the cash surrender values and paid-up nonforfeiture benefits pro-
vided by such plan must not be less than the minimum values and benefits
required for the plan computed by a method consistent with the princi-
ples of this standard nonforfeiture law, as determined by regulations
promulgated by the commissioner.
  (f)  Any cash surrender value and any paid-up nonforfeiture benefit,
available under any such policy in the event of default in the payment of
any premium due at any time other than on the policy anniversary, shall
be calculated with allowance for the lapse of time and the payment of
fractional premiums beyond the beginning of the policy year in which the
default occurs. All values referred to in subsections (b), (c), (d), (d-1), (d-
2) and (d-3) may be calculated upon the assumption that any death benefit
is payable at the end of the policy year of death. The net value of any
paid-up additions, other than paid-up term additions, shall be not less
than the amounts used to provide such additions. Notwithstanding the
provisions of subsection (b), additional benefits payable: (i) In the event
of death or dismemberment by accident or accidental means; (ii) in the
event of total and permanent disability; (iii) as reversionary annuity or
deferred reversionary annuity benefits; (iv) as term insurance benefits
provided by a rider or supplemental policy provision to which, if issued
as a separate policy, this section would not apply; (v) as term insurance
on the life of a child or on the lives of children provided in a policy on
the life of a parent of a child, if such term insurance expires before the
child's age is 26, is uniform in amount after the child's age is one, and
has not become paid-up by reason of the death of a parent of the child;
and (vi) as other policy benefits additional to life insurance and endow-
ment benefits, and premiums for all such additional benefits, shall be
disregarded in ascertaining cash surrender values and nonforfeiture ben-
efits required by this section, and no such additional benefits shall be
required to be included in any paid-up nonforfeiture benefits.
  (g)  This subsection, in addition to all other applicable subsections of
this section, shall apply to all policies issued on or after January 1, 1986.
Any cash surrender value available under the policy in the event of default
in a premium payment due on any policy anniversary shall be in an
amount which does not differ by more than .2% of either the amount of
insurance, if the insurance be uniform in amount, or the average amount
of insurance at the beginning of each of the first 10 policy years, from
the sum of: (a) The greater of zero and the basic cash value hereinafter
specified; and (b) the present value of any existing paid-up additions less
the amount of any indebtedness to the company under the policy.
  The basic cash value shall be equal to the present value, on such an-
niversary, of the future guaranteed benefits which would have been pro-
vided for by the policy, excluding any existing paid-up additions and be-
fore deduction of any indebtedness to the company, if there had been no
default, less the then present value of the nonforfeiture factors, as here-
inafter defined, corresponding to premiums which would have fallen due
on and after such anniversary. The effects on the basic cash value of
supplemental life insurance or annuity benefits or of family coverage, as
described in subsection (b) or (d), whichever is applicable, shall be the
same as are the effects specified in subsection (b) or (d), whichever is
applicable on the cash surrender values defined in that subsection.
  The nonforfeiture factor for each policy year shall be an amount equal
to a percentage of the adjusted premium for the policy year, as defined
in subsection (d) or (d-3), whichever is applicable. Except as is required
by the next succeeding sentence of this paragraph, such percentage:
  (a) (1)  Must be the same percentage for each policy year between
the second policy anniversary and the later of: (i) The fifth policy anni-
versary; and (ii) the first policy anniversary at which there is available
under the policy a cash surrender value in an amount, before including
any paid-up additions and before deducting any indebtedness, of at least
.2% of either the amount of insurance, if the insurance be uniform in
amount, or the average amount of insurance at the beginning of each of
the first 10 policy years; and
  (b) (2)  must be such that no percentage after the later of the two
policy anniversaries specified in the preceding item (a) may apply to fewer
than five consecutive policy years.
  No basic cash value may be less than the value which would be obtained
if the adjusted premiums for the policy, as defined in subsection (d) or
(d-3), whichever is applicable, were substituted for the nonforfeiture fac-
tors in the calculation of the basic cash value.
  All adjusted premiums and present values referred to in this subsection
shall for a particular policy be calculated on the same mortality and in-
terest bases as are used in demonstrating the policy's compliance with
the other sections of this act. The cash surrender values referred to in
this subsection shall include any endowment benefits provided for by the
policy.
  Any cash surrender value available other than in the event of default
in a premium payment due on a policy anniversary, and the amount of
any paid-up nonforfeiture benefit available under the policy in the event
of default in a premium payment shall be determined in manners con-
sistent with the manners specified for determining the analogous mini-
mum amounts in subsections (a), (b), (c), (d-3), and (f). The amounts of
any cash surrender values and of any paid-up nonforfeiture benefits
granted in connection with additional benefits such as those listed as items
  (i) through (vi) in subsection (f) shall conform with the principles of this
subsection (g).
  (h)  This section shall not apply to any of the following: (1) Reinsur-
ance; (2) group insurance; (3) pure endowment; (4) annuity or reversion-
ary annuity contract; (5) term policy of uniform amount, which provides
no guaranteed nonforfeiture or endowment benefits, or renewal thereof,
of 20 years or less expiring before age 71, for which uniform premiums
are payable during the entire term of the policy; (6) term policy of de-
creasing amount, which provides no guaranteed nonforfeiture or endow-
ment benefits, on which each adjusted premium calculated as specified
in subsections (d), (d-1), (d-2) and (d-3), is less than the adjusted premium
so calculated, on a term policy of uniform amount, or renewal thereof,
which provides no guaranteed nonforfeiture or endowment benefits, is-
sued at the same age and for the same initial amount of insurance and
for a term of 20 years or less expiring before age 71, for which uniform
premiums are payable during the entire term of the policy; (7) policy,
which provides no guaranteed nonforfeiture or endowment benefits, for
which no cash surrender value, if any, or present value of any paid-up
nonforfeiture benefit, at the beginning of any policy year, calculated as
 specified in subsections (b), (c), (d), (d-1), (d-2) and (d-3), exceeds 21/2%
of the amount of insurance at the beginning of the same policy year; nor
  (8) policy which shall be delivered outside this state through an agent or
other representative of the company issuing the policy.
  For purposes of determining the applicability of this section, the age
at expiry for a joint term life insurance policy shall be the age at expiry
of the oldest life.
  (i)  After the effective date of this act, any company may file with the
commissioner of insurance a written notice of its election to comply with
the provisions of this section other than as provided in subsections (d-1),
(d-2), (d-3), (e) and (g) after a specified date. After the filing of such
notice, then upon such specified date (which shall be the operative date
for such company) such provisions shall become operative with respect
to all policies thereafter issued by such company.
  (j)  Any company, having filed written notices as provided in the pre-
ceding subsection (i), and desiring to withdraw from such election as to
future policies may file with the commissioner of insurance a written
notice of such withdrawal after a specified date, and of its intention to
value all its future policies in accordance with the provisions of subsection
  (b) of K.S.A. 40-409, and amendments thereto, and to provide nonfor-
feiture benefits and cash surrender values in future policies in accordance
with K.S.A. 40-427 and amendments thereto. After the filing of such with-
drawal notice, then upon such specified date, subsection (b) of K.S.A. 40-
409, and amendments thereto, and K.S.A. 40-427 and amendments
thereto shall become operative with respect to all policies thereafter is-
sued by such company in this state.
  Sec. 3.  K.S.A. 40-428a is hereby amended to read as follows: 40-
428a. (a) This section shall be known as the standard nonforfeiture law
for individual deferred annuities.
  (b)  This section shall 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) or by an employee organization, or by both, other than a
plan providing individual retirement accounts or individual retirement
annuities under section 408 of the internal revenue code, as now or here-
after amended, premium deposit fund, variable annuity, investment an-
nuity, immediate annuity, any deferred annuity contract after annuity pay-
ments have commenced, or reversionary annuity, nor to any contract
which shall be delivered outside this state through an agent or other
representative of the company issuing the contract.
  (c)  In the case of contracts issued on or after the operative date of
this section as defined in subsection (1), no contract of annuity, except as
stated in subsection (b), shall be delivered or issued for delivery in this
state unless it contains in substance the following provisions, or corre-
sponding provisions which in the opinion of the commissioner are at least
as favorable to the contractholder, upon cessation of payment of consid-
erations under the contract.
  (1)  That upon cessation of payment of considerations under a con-
tract, the company will grant a paid-up annuity benefit on a plan stipu-
lated in the contract of such value as is specified in subsection (e), (f),
  (g), (h), and (j).
  (2)  If a contract provides for a lump sum settlement at maturity, or
at any other time, that upon surrender of the contract at or prior to the
commencement of any annuity payments, the company will pay in lieu of
any paid-up annuity benefit a cash surrender benefit of such amount as
is specified in subsections (e), (f), (h), and (j). The company shall reserve
the right to defer the payment of such cash surrender benefit for a period
of six (6) months 30 days after demand therefor with surrender of the
contract.
  (3)  A statement of the mortality table, if any, and interest rates used
in calculating any minimum paid-up annuity, cash surrender or death
benefits that are guaranteed under the contract, together with sufficient
information to determine the amounts of such benefits.
  (4)  A statement that any paid-up annuity, cash surrender or death
benefits that may be available under the contract are not less than the
minimum benefits required by any statute of the state in which the con-
tract is delivered and an explanation of the manner in which such benefits
are altered by the existence of any additional amounts credited by the
company to the contract, any indebtedness to the company on the con-
tract or any prior withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this subsection, any deferred an-
nuity contract may provide that if no considerations have been received
under a contract for a period of two (2) full years and the portion of the
paid-up annuity benefit at maturity on the plan stipulated in the contract
arising from considerations paid prior to such period would be less than
twenty dollars ($20) $20 monthly, the company may at its option termi-
nate such contract by payment in cash of the then present value of such
portion of the paid-up annuity benefit, calculated on the basis of the
mortality table, if any, and interest rate specified in the contract for de-
termining the paid-up annuity benefit, and by such payment shall be
relieved of any further obligation under such contract.
  (d)  The minimum values as specified in subsections (e), (f), (g), (h)
and (j) of any paid-up annuity, cash surrender or death benefits available
under an annuity contract shall be based upon minimum nonforfeiture
amounts as defined in this subsection.
  (1)  With respect to contracts providing for flexible considerations, the
minimum nonforfeiture amount at any time at or prior to the commence-
ment of any annuity payments shall be equal to an accumulation up to
such time at a rate of interest of three percent (3%) 3% per annum of
percentages of the net considerations (as hereinafter defined) paid prior
to such time, decreased by the sum of:
  (i)  Any prior withdrawals from or partial surrenders of the contract
accumulated at a rate of interest of three percent (3%) 3% per annum, ;
and
  (ii)  the amount of any indebtedness to the company on the contract,
including interest due and accrued, and increased by any existing addi-
tional amounts credited by the company to the contract.
  The net considerations for a given contract year used to define the
minimum nonforfeiture amount shall be an amount not less than zero
and shall be equal to the corresponding gross considerations credited to
the contract during that contract year less an annual contract charge of
thirty dollars ($30) $30 and less a collection charge of one dollar and
twenty-five cents ($1.25) $1.25 per consideration credited to the contract
during that contract year. The percentages of net considerations shall be
sixty-five percent (65%) 65% of the net consideration for the first contract
  year and eighty-seven and one-half percent (871/2%) 871/2% of the net
considerations for the second and later contract years. Notwithstanding
the provisions of the preceding sentence, the percentage shall be sixty-
five percent (65%) 65% of the portion of the total net consideration for
any renewal contract year which exceeds by not more than two times the
sum of those portions of the net considerations in all prior contract years
for which the percentage was sixty-five percent (65%) 65%.
  (2)  With respect to contracts providing for fixed scheduled consid-
erations, minimum nonforfeiture amounts shall be calculated on the as-
sumption that considerations are paid annually in advance and shall be
defined as for contracts with flexible considerations which are paid an-
nually with two exceptions:
  (a)  The portion of the net consideration for the first contract year to
be accumulated shall be the sum of sixty-five percent (65%) 65% of the
net consideration for the first contract year plus twenty-two and one-half
 percent (22 1/2%) 221/2% of the excess of the net consideration for the
first contract year over the lesser of the net considerations for the second
and third contract years.
  (b)  The annual contract charge shall be the lesser of: (i) thirty dollars
($30) $30, or (ii) ten percent (10%) 10% of the gross annual consideration.
  (3)  With respect to contracts providing for a single consideration,
minimum nonforfeiture amounts shall be defined as for contracts with
flexible considerations except that the percentage of net consideration
used to determine the minimum nonforfeiture amount shall be equal to
ninety percent (90%) 90% and the net consideration shall be the gross
consideration less a contract charge of seventy-five dollars ($75) $75.
  (e)  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 specified in the contract for determining the minimum paid-
up annuity benefits guaranteed in the contract.
  (f)  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
(1%) 1% higher than the interest rate specified in the contract for accu-
mulating the net considerations to determine such maturity value, de-
creased by the amount of any indebtedness to the company on the con-
tract, including interest due and accrued, and increased by any existing
additional amounts credited by the company to the contract. In no event
shall any cash surrender benefit 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.
  (g)  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 de-
ferred 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 ma-
turity 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. However, In no event shall the
present value of a paid-up annuity benefit be less than the minimum
nonforfeiture amount at that time.
  (h)  For the purpose of determining the benefits calculated under
subsections (f) and (g), 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 seventieth birthday or the tenth anniversary of the con-
tract, whichever is later.
  (i)  Any contract which does not provide cash surrender benefits or
does not provide death benefits at least equal to the minimum nonfor-
feiture 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.
  (j)  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 con-
siderations under the contract occurs.
  (k)  For any contract which provides, within the same contract by rider
or supplemental contract provision, both annuity benefits and life insur-
ance benefits that are in excess of the greater of cash surrender benefits
or a return of the gross considerations with interest, the minimum non-
forfeiture benefits shall be equal to the sum of the minimum nonforfei-
ture benefits for the annuity portion and the minimum nonforfeiture ben-
efits, if any, for the life insurance portion computed as if each portion
were a separate contract. Notwithstanding the provisions of subsections
  (e), (f), (g), (h) and (j), additional benefits payable (1) in the event of
     total
and permanent disability, (2) as reversionary annuity or deferred rever-
sionary annuity benefits, or (3) 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 mini-
mum nonforfeiture amounts, paid-up annuity, cash surrender and death
benefits that may be required by this section. The inclusion of such ad-
ditional 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.
  (l)  After July 1, 1978, any company may file with the commissioner
a written notice of its election to comply with the provisions of this section
after a specified date before July 1, 1980. After the filing of such notice,
then upon such specified date, which shall be the operative date of this
section for such company, this section shall become operative with respect
to annuity contracts thereafter issued by such company. If a company
makes no such election, the operative date of this section for such com-
pany shall be July 1, 1980.
  Sec. 4.  K.S.A. 40-429 is hereby amended to read as follows: 40-429.
  (a) In the case of those policies issued prior to the operative date of K.S.A.
40-428 and amendments thereto (the standard nonforfeiture law) the loan
value referred to in subsection (5) of K.S.A. 40-420 and amendments
thereto, shall be the reserve at the end of the current policy year on the
policy and on the dividend additions thereto, if any, exclusive of the re-
serve on account of return premium insurance and of total and permanent
disability and additional accidental death benefits, less a sum not more
 than two and one-half percentum 21/2% of the amount insured by the
policy and of any dividend additions thereto (the policy to specify the
mortality table and rate of interest adopted for computing such reserve).
Such policies may further provide that such loan may be deferred for not
exceeding six months 30 days after the application therefor is made.
  (b)  In the case of policies issued on or after the operative date of
K.S.A. 40-428 and amendments thereto (the standard nonforfeiture law)
the loan value referred to in subsection (5) of K.S.A. 40-420 and amend-
ments thereto, shall be the cash surrender value at the end of the current
policy year as required by K.S.A. 40-428 and amendments thereto. The
company shall reserve the right to defer such loan, except when made to
pay premiums, for six months 30 days after application therefor is made.
  Sec. 5.  K.S.A. 40-247, 40-428, 40-428a and 40-429 are hereby re-
pealed.
  Sec. 6.  This act shall take effect and be in force from and after its
publication in the statute book.