Pennsylvania Code › Title 31 - INSURANCE › Part IV - Life Insurance › Chapter 82 - VARIABLE LIFE INSURANCE › INSURANCE POLICY REQUIREMENTS › Section 82.25 - Policy loan provisions

Current through Register Vol. 54, No. 28, July 13, 2024
A variable life insurance policy, delivered or issued for
					 delivery in this Commonwealth, other than a term insurance policy or pure
					 endowment policy, shall contain a provision which provides for policy loans
					 after the policy has been in force for 3 full years. The provision for policy
					 loans may not be less favorable than the following:
(1) At least 75% of the cash surrender value
				  of the policy may be borrowed.
(2)
				  The amount borrowed shall bear interest at a rate not to exceed that permitted
				  by section 410F of the act (40 P. S. §
											510e).
(3) An indebtedness shall be deducted from
				  the proceeds payable on death.
(4)
				  An indebtedness shall be deducted from the cash surrender value upon surrender
				  or in determining a nonforfeiture benefit.
(5) For scheduled premium policies, whenever
				  the indebtedness exceeds the cash surrender value, the insurer shall give
				  notice of intent to cancel the policy if the excess indebtedness is not repaid
				  within 31 days after the date of mailing the notice. For flexible premium
				  policies, whenever the total charges authorized by the policy that are
				  necessary to keep the policy in force until the next following policy
				  processing day exceed the amounts available under the policy to pay the
				  charges, a report shall be sent to the policyholder containing the information
				  specified by §
										82.74 (relating to warning
				  statements for flexible premium policies).
(6) The policy may provide that if, at any
				  time, so long as premiums are paid, the variable death benefit is less than it
				  would have been if no loan or withdrawal had ever been made, then the
				  policyholder may increase the variable death benefit up to what it would have
				  been if there had been no loan or withdrawal by paying an amount not exceeding
				  110% of the corresponding increase in cash value and by furnishing evidence of
				  insurability that the insurer may request.
(7) The policy may specify a reasonable
				  minimum amount which may be borrowed at any time, but the minimum does not
				  apply to an automatic premium loan provision.
(8) A policy loan provision is not required
				  if the policy is under the extended insurance nonforfeiture option.
(9) The policy loan provisions shall be
				  construed so that variable life insurance policyholders who have not exercised
				  the provisions are not disadvantaged by the exercise thereof.
(10) Amounts paid to the policyholders upon
				  the exercise of any policy loan provision shall be withdrawn from the separate
				  account and shall be returned to the separate account upon repayment, except
				  that a stock insurer may provide the amounts for policy loans from the general
				  account.
This section cited in 31 Pa. Code §
												82.21 (relating to insurance
						policy qualification); 31 Pa. Code §
												82.23 (relating to mandatory
						policy benefit and design requirements); and 31 Pa. Code §
												82.26 (relating to other policy
						provisions).