1. (1) Gross modal premiums means the premiums specified in the policy for the 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.
2. (2) Modal adjusted nonforfeiture premiums for a policy year means the modal equivalent of the annual adjusted nonforfeiture premium for that year as defined in section 4221 of the Insurance Law.
3. (3) Calculated value for a policy anniversary means the present value, on the anniversary of the future guaranteed benefits that are provided for by the policy, including any existing paid-up additions, over the sum of the then present value of the adjusted premiums as defined in section 4221 of the Insurance Law, corresponding to the premium that would have fallen due on and after the anniversary. The interest rate and mortality used for discounting shall be the same as required to demonstrate compliance with section 4221(c)(1) of the Insurance Law. The calculated value is not subject to a minimum value of zero.

4. (b) If a policy has nonforfeiture values, the nonforfeiture values during a policy year shall not be less than the nonforfeiture value produced by either subdivision (c) or (d) of this section. However, a policy does not have to provide for a voluntary surrender between premium due dates.

   1. (1) The nonforfeiture value is the greater of zero or the following:

      1. (a) the present value at the end of the policy month of valuation of the calculated value on the next policy anniversary; and

      2. (b) the present value at the end of the policy month of valuation of the guaranteed benefits that would have been provided for by the policy including any paid-up additions from the end of the policy month of valuation to the next policy anniversary; less

         (ii)

      3. (a) the present value at the end of the policy month of valuation of the modal adjusted nonforfeiture premiums due on or after the end of the policy month of valuation and before the next policy anniversary;
      4. (b) any indebtedness to the life insurance company or fraternal benefit society on the policy including interest due or accrued; and
      5. (c) the lesser of $1 per $1,000 of death benefit or 10 percent of the due and paid premium for the period beyond the date of valuation.

      (i)

   2. (2) The nonforfeiture interest rate and mortality assumptions for discounting in this subdivision are those required to demonstrate compliance with section 4221(c)(1) of the Insurance Law.

   3. (3) The modal adjusted nonforfeiture premiums for a policy year shall be calculated such that:

      1. (i) the ratio of the modal adjusted nonforfeiture premium for each premium due date during the policy to the corresponding premium due on each premium due date is a constant percentage throughout the policy year;
      2. (ii) the present value of the modal adjusted nonforfeiture premiums for a policy year shall equal the annual adjusted nonforfeiture premium for that year as defined in section 4221 of the Insurance Law; and

      3. (iii) the interest rate and mortality used for discounting in subparagraph (ii) of this paragraph shall be the same as required to demonstrate compliance with section 4221(c)(1) of the Insurance Law.

         (d) Interpolation method.

         For policies with level premium and level benefits during the policy year, the minimum nonforfeiture value is the greater of zero and the minimum nonforfeiture value calculated in accordance with either paragraph (1) or (2) of this subdivision. For policies that do not have level premium and level benefits during the policy year, the minimum nonforfeiture value is the greater of zero and the minimum nonforfeiture value calculated in accordance with paragraph (2) of this subdivision. The methods described in paragraphs (1) and (2) produce identical results for policies that have level premium and level benefits during the policy year.

   4. (1) Straight line interpolation method. The minimum nonforfeiture values during a policy year using the straight line interpolation method are equal to:

      1. (i) the sum of:

         1. (a) the calculated value at the end of the prior policy anniversary times the fraction of the year from the end of the month of valuation to the next policy anniversary;
         2. (b) the calculated value at the end of the next policy anniversary times the fraction of the year from the beginning of the year to the end of the month of valuation; and
         3. (c) the fraction of the year from the end of the policy month of valuation to the next paid to date times, as elected by the insurer for that policy, either the sum of the gross modal premiums for the policy year or the adjusted nonforfeiture premium for the policy year; less

      2. (ii) the sum of:

         1. (a) any indebtedness to life insurance company or fraternal benefit society on the policy including interest due or accrued; and
         2. (b) the lesser of $1 per $1,000 of death benefit or 10 percent of either the gross premiums or the adjusted premium, as elected under clause (i)(c) of this paragraph, due and paid for the period beyond the date of valuation.

   5. (2) Weighted linear interpolation method. The minimum nonforfeiture values during a policy year using the weighted linear interpolation method are equal to:

      1. (i) the sum of:

         1. (a) the calculated value at the end of the prior policy anniversary; and
         2. (b) as elected by the insurer for that policy either the gross modal premium due and paid since the beginning of the policy year or the ratio of the gross modal premiums due and paid since the beginning of the policy year to the sum of the gross modal premiums for the policy year multiplied by adjusted nonforfeiture premium for the policy year; less

      2. (ii) the sum of:

         1. (a) the cost of insurance as calculated in accordance with paragraph (3) of this subdivision;
         2. (b) any indebtedness to life insurance company or fraternal benefit society on the policy including interest due or accrued; and
         3. (c) the lesser of $1 per $1,000 of death benefit or 10 percent of either the gross premiums or the adjusted premium, as elected under clause (i)(b) of this paragraph, due and paid for the period beyond the date of valuation.

   6. (3) The cost of insurance for subparagraph (2)(ii) of this subdivision is found by multiplying the cost of insurance rate for the year by the sum of insurance provided at the beginning of each month, including any paid-up additions, from the prior policy anniversary through the end of the policy month of valuation. The cost of insurance rate is the result of dividing the difference of A minus B by C, where:

      1. (i) A is either the gross modal premium for the policy year or the adjusted premium for the year consistent with the election made in clause (2)(i)(b) of this subdivision;
      2. (ii) B is the calculated value at the next policy anniversary less the calculated value at the end of the prior policy anniversary; and
      3. (iii) C is the sum of the amount of guaranteed insurance, including any paid-up additions, at the beginning of each month during the current policy year.

   (c) Actuarial method.

5. (e) The nonforfeiture value in subdivision (c) of this section may be calculated upon the assumption that the death benefit is payable either at the time of death or at the end of the policy year in which the death occurred. For non-level death benefits payable during a year or a part thereof, a time and amount weighted average of the death benefits may be substituted.
6. (f) The nonforfeiture value in subdivisions (c) and (d) of this section may be calculated as of the exact day of surrender instead of the end of the policy month.
7. (g) A policy may provide for a refund of premium actually paid for any period beyond the date of surrender. The refund shall not be considered a nonforfeiture benefit for the purposes of section 4221(o) of the Insurance Law.

(a)