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



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



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



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



(4)  The term policy loan includes any premium loan
made under a policy to pay one or more premiums that were not paid to the life
insurer 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 of
not more than eight per cent per annum; or



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



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



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



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



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



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



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



(e)  The life insurer shall:



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



(2)  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
paragraph (3); and



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



(f)  No policy shall terminate in a policy year
as 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 the
time at which it would otherwise have terminated if there had been no change
during that policy year.



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