§431:10D-103  Policy loan interest rates forpolicies issued after June 22, 1982.  (a)  For the purposes of thissection:

(1)  The rate of interest on policy loans permittedunder this section includes the interest rate charged on reinstatement ofpolicy loans for the period during and after any lapse of a policy.

(2)  The term policy includes certificates issued by afraternal benefit society and annuity contracts which provide for policy loans.

(3)  The term policyholder includes the owner of thepolicy or the person designated to pay premiums as shown on the records of thelife insurer.

(4)  The term policy loan includes any premium loanmade under a policy to pay one or more premiums that were not paid to the lifeinsurer as they fell due.

(b)  Policies issued on or after June 22, 1982,shall provide for maximum policy loan interest rates as follows:

(1)  A provision permitting a maximum interest rate ofnot more than eight per cent per annum; or

(2)  A provision permitting an adjustable maximuminterest rate established from time to time by the life insurer as permitted bylaw.

Insurers issuing policies with interest rates asprovided in subsection (b)(2) shall make available policies with interest ratesas provided in subsection (b)(1).

(c)  The rate of interest charged on a policyloan made under subsection (b)(2) shall not exceed the higher of the following:

(1)  The Moody's Corporate Bond Yield Average-MonthlyAverage Corporate, as published by Moody's Investors Service, Inc. or anysuccessor thereto, for the calendar month ending two months before the date onwhich the rate is determined; or

(2)  The rate used to compute the cash surrendervalues under the policy during the applicable period plus one per cent perannum;

In the event that the Moody's Corporate Bond YieldAverage-Monthly Average Corporate is no longer published by Moody's InvestorsService, Inc., a substantially similar average, approved by rule adopted by thecommissioner, shall be substituted.

(d)  If the maximum rate of interest isdetermined pursuant to subsection (b)(2), the policy shall contain a provisionsetting forth the frequency at which the rate is to be determined for thatpolicy.  The maximum rate for each policy shall be determined at regularintervals at least once every twelve months, but not more frequently than oncein any three-month period.  At the intervals specified in the policy, the ratebeing charged shall be reduced whenever such reduction as determined undersubsection (b)(2) would decrease that rate by one-half per cent or more perannum.

(e)  The life insurer shall:

(1)  Notify the policyholder at the time a cash loanis made of the initial rate of interest on the loan;

(2)  Notify the policyholder with respect to premiumloans of the initial rate of interest on the loan as soon as it is reasonablypractical to do so after making the initial loan.  Notice need not be given tothe policyholder when a further premium loan is added, except as provided inparagraph (3); and

(3)  Send to policyholders with loans reasonableadvance notice of any increase in the rate.

(f)  No policy shall terminate in a policy yearas the sole result of a change in the interest rate during that policy year,and the life insurer shall maintain coverage during that policy year until thetime at which it would otherwise have terminated if there had been no changeduring that policy year.

(g)  The substance of the pertinent provisionsof subsections (a) through (d) shall be set forth in the policies to which theyapply. [L 1987, c 347, pt of §2; am L 2004, c 122, §44]