New York Codes, Rules and Regulations › Title 11 - INSURANCE › Chapter III - Policy and Certificate Provisions › Subchapter A - Life, Accident and Health Insurance › Part 43 - Individual Life Insurance Market-value Adjustment › Section 43.4 - Policy loans

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Every
				  policy shall contain a provision entitling the policyholder to a loan while the
				  policy is in force in an amount not exceeding the policy loan value and under
				  the conditions specified in the policy and this section, provided three full
				  years' premiums have been paid or, in the case of single premium or flexible
				  premium policies, after three years from the issue of the policy, if the policy
				  is not in default.
(b) The amount
				  of the loan shall bear interest not in excess of the maximum rate or adjustable
				  maximum rate permitted by sections 3203 (a)(8)(F), 3206 and
				  4510  of the Insurance Law. If the loan is
				  made or repaid on a date other than the anniversary of the policy, the company
				  may collect interest for the portion of the current policy year on a pro rata
				  basis.
(c) Any indebtedness shall
				  be deducted from the policy proceeds on death.
(d) In determining cash surrender benefits or
				  other nonforfeiture benefits under a policy, any indebtedness shall be deducted
				  from the amount of the market-value adjusted cash surrender value.
(e) A policy may provide that if interest on
				  a loan is not paid when due, it shall be added to the existing loan, and shall
				  bear interest at the applicable rate or rates payable on the loan determined in
				  accordance with the provisions of the policy.
(f) A policy may provide that when the
				  indebtedness equals or exceeds the cash surrender value and if prior notice
				  shall have been given in the manner herein provided, then the policy shall
				  terminate and become void; provided, however, no policy shall terminate in a
				  policy year as the sole result of a change in the policy loan interest rate
				  during that policy year, and the company shall maintain coverage during that
				  policy year until the time at which the policy would otherwise have terminated
				  if there had been no change during that year. The notice provided by the
				  company shall be mailed to the last known address of the policyholder and shall
				  state the company's intent to terminate the policy if the amount by which the
				  indebtedness exceeds the cash surrender value on a date specified in the notice
				  is not paid within a period of not less than 31 days after the date of mailing
				  of such notice.
(g) When a loan is
				  made under a policy, an amount (which after adjustment in accordance with the
				  market-value adjustment formula is equal to the loan) is subtracted from the
				  nonborrowed portion of the policy value and an amount equal to the loan is
				  established in, or added to, the loan account portion of the policy value. Any
				  loan repayments will diminish the loan account by an equal amount and shall be
				  treated in the same manner as a current premium remittance (but without
				  charging additional expense loads or adding additional surrender charges) for
				  purposes of determining future market-value adjustments, cash surrender
				  benefits and policy loan values. (See examples 6 and 9 in section
				  43.9[c] 
				  of this Part.)
(h) The policy shall
				  describe how the market-value adjustment formula affects policy loans and loan
				  accounts and how policy loans and payments of indebtedness affect cash
				  surrender benefits.
(i) In
				  crediting interest to the loan account under a policy, the guaranteed rate may
				  be reduced so that the total amounts credited to the loan account are credited
				  at a rate that is up to two percent less than the applicable loan interest rate
				  charged (but not less than the long-term contractual minimum guaranteed rate)
				  or at such other rate as the superintendent, upon the company's demonstrating
				  justification therefor, may allow.