§ 27-4-13.1. Policy loan interest rates.
(a) "Published monthly average� means:
(1) Moody's corporate bond yield average — monthly average corporates, as published by
Moody's Investors Service, Inc. or any successor; or
(2) In the event that the Moody's corporate bond yield average — monthly average corporates
is no longer published, a substantially similar average, established by regulation
issued by the commissioner.
(b)(1) Policies issued on or after May 25, 1982, shall provide for policy loan interest rates
as follows:
(i) A provision permitting a maximum interest rate of not more than eight percent (8%)
per annum; or
(ii) A provision permitting an adjustable maximum interest rate established from time to
time by the life insurer as permitted by law.
(2) The rate of interest charged on a policy loan made under subsection (b)(1)(ii) of
this section shall not exceed the higher of the following:
(i) The published monthly average for the calendar month ending two (2) months before
the date on which the rate is determined; or
(ii) The rate used to compute the cash surrender values under the policy during the applicable
period plus one percent (1%) per annum.
(3) If the maximum rate of interest is determined pursuant to subsection (b)(1)(ii) of
this section, the policy shall contain a provision setting forth the frequency at
which the rate is to be determined for that policy.
(4) The maximum rate for each policy must be determined at regular intervals at least
once every twelve (12) months, but not more frequently than once in any three-month
(3) period. At the intervals specified in the policy:
(i) The rate being charged may be increased when an increase as determined under subsection
(b)(2) of this section would increase that rate by one-half of one percent (.5%) or
more per annum;
(ii) The rate being charged must be reduced when a reduction as determined under subsection
(b)(2) of this section would decrease that rate by one-half of one percent (.5%) or
more per annum.
(5) The life insurer shall:
(i) Notify the policyholder at the time a cash loan is made of the initial rate of interest
on the loan;
(ii) 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 does not need to be given to the policyholder when a further premium
loan is added, except as provided in subsection (b)(5)(iii) of this section;
(iii) Send to policyholders with loans reasonable advance notice of any increase in the
rate; and
(iv) Include in the notices required in this subsection (b)(5) the substance of the pertinent
provisions of subsections (b)(1) and (b)(3) of this section.
(6) 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 have terminated if there had been
no change during that policy year.
(7) The substance of the pertinent provisions of subsections (b)(1) and (b)(3) of this
section shall be set forth in the policies to which they apply.
(8) For purposes of this section:
(i) The rate of interest on policy loans permitted under this section includes the interest
rate charged on the reinstatement of policy loans for the period during and after
any lapse of a policy;
(ii) "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 became due;
(iii) "Policyholder� includes the owner of the policy or the person designated to pay premiums
as shown on the records of the life insurer; and
(iv) "Policy� includes certificates issued by a fraternal benefit society and annuity contracts
that provide for policy loans.
(9) No other provision of law shall apply to policy loan interest rates unless made specifically
applicable to those rates.
(c) The provisions of this section shall not apply to any insurance contract issued before
May 25, 1982, unless the policyholder agrees in writing to the applicability of this
section.