§ 26-16-108 — Policy loans

(a) As used in this section:
(i) "Policy" includes certificates issued by a
fraternal benefit society and annuity contracts which provide
for policy loans;
(ii) "Policyholder" includes the owner of the policy
or the person designated to pay premiums as shown on the records
of the life insurer;
(iii) "Policy loan" includes any premium loan made
under a policy to pay one (1) or more premiums not paid to the
life insurer when due;
(iv) "Published monthly average" means:
(A) Moody's Corporate Bond Yield Average-Monthly
Average Corporates as published by Moody's Investors Service,
Inc. or any successor; or
(B) If the Moody's Corporate Bond Yield
Average-Monthly Average Corporates is no longer published, a
substantially similar average established by regulation of the
commissioner.
(v) "The rate of interest on policy loans" authorized
under this section includes the interest rate charged on
reinstatement of policy loans for the period during and after
any lapse of a policy.
(b) After three (3) full years premiums are paid and after
the policy has a cash surrender value and while no premium is in
default beyond the grace period, the insurer will advance, on
proper assignment or pledge of the policy and on the sole
security of the policy, at a specified rate of interest, an
amount equal to or at the option of the entitled party less than
the policy's loan value. The policy loan value shall be at least
equal to the cash surrender value at the end of the then current
policy year, provided that the insurer may deduct from the loan
value or from the loan proceeds, any existing indebtedness not
already deducted in determining the cash surrender value
including any interest then accrued but not due, any unpaid
balance of the premium for the current policy year and interest
on the loan to the end of the current policy year.
(c) The policy may also provide that:
(i) If interest on any indebtedness is not paid when
due, it shall be added to the existing indebtedness and shall
bear interest at the same rate; and
(ii) If the total indebtedness on the policy,
including interest due or accrued, equals or exceeds the amount
of the policy loan value, the policy terminates and is void
after notice is mailed by the insurer within at least thirty
(30) days to the last address of record with the insurer of the
insured or other policy owner and of any assignee of record at
the insurer's home office.
(d) The policy shall reserve the insurer's right to defer
the granting of a loan, other than for the payment of any
premium to the insurer, for six (6) months after application.
The provision shall also contain a table indicating in writing
the loan values each year during the first twenty (20) years of
the policy or during the term of the policy, whichever is
shorter.
(e) The policy, at the insurer's option, may provide for
automatic premium loan.
(f) This section does not apply to:
(i) Term policies;
(ii) Term insurance benefits provided by rider or
supplemental policy provisions; or
(iii) Industrial life insurance policies.
(g) Policies issued on or after July 1, 1983 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 year; or
(ii) A provision permitting an adjustable maximum
interest rate established from time to time by the life insurer
as authorized by law.
(h) The rate of interest charged on a policy loan made
under paragraph (g)(ii) of this section shall not exceed the
higher of the published monthly average for the calendar month
ending two (2) months prior to the date on which the rate is
determined or the rate used to compute the cash surrender values
under the policy during the applicable period plus one percent
(1%) per year.
(j) The policy shall contain a provision stating 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 (12) months but not more
than once every three (3) months. At the intervals specified in
the policy:
(i) The rate charged may be increased if the increase
determined under subsection (h) of this section increases the
rate by one-half percent (1/2%) or more per year; and
(ii) The rate charged shall be reduced if the
reduction determined under subsection (h) of this section
decreases the rate by one-half percent (1/2%) or more per year.
(k) The life insurer shall:
(i) Notify the policyholder of the initial rate of
interest on the loan at the time a cash loan is made;
(ii) Notify the policyholder of the initial rate of
interest on a premium loan as soon as reasonably practical after
making the initial loan. No notice is required if an additional
premium loan is added except as provided in paragraph (iii) of
this subsection;
(iii) Provide policyholders having loans reasonable
advance notice of any rate increase; and
(iv) Include in notices to policyholders required by
this subsection the substance of the pertinent provisions of
subsections (g) and (j) of this section.
(m) The loan value of the policy shall be determined in
accordance with W.S. 26-16-202(a)(vi). No policy shall terminate
in a policy year as the sole result of a change in the interest
rate during that policy year. 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 interest
rate change during that policy year.
(n) The substance of the pertinent provisions of
subsections (g) and (j) of this section shall be stated within
the policies to which they apply.
(o) No other provision of law shall apply to policy loan
interest rates unless made specifically applicable to such
rates.