2006 New York Code - Policies Which Provide For An Adjustable Maximum Rate Of Interest On Policy Loans.

 
    §  3206.  Policies  which  provide  for  an adjustable maximum rate of
  interest on policy loans.  (a) In this section:
    (1) The term "policy" includes: (i) life insurance policies subject to
  the provisions of item (ii) of subparagraph (F) of  paragraph  eight  of
  subsection  (a)  of  section  three  thousand  two hundred three of this
  article, and  (ii)  annuity  contracts  subject  to  the  provisions  of
  subsection  (c)  of  section three thousand two hundred nineteen of this
  article, and (iii) certificates issued by a  fraternal  benefit  society
  subject  to the provisions of paragraph six of subsection (a) of section
  four thousand five  hundred  ten  of  this  chapter,  and  (iv)  annuity
  certificates  subject  to section four thousand five hundred thirteen of
  this chapter, when such policies, contracts, or certificates provide for
  loans with adjustable rates of interest.
    (2) The term "policy loan" includes any cash  loans  and  any  premium
  loans made under a policy to pay one or more premiums that were not paid
  to the life insurer as they fell due.
    (3)  The  term  "policyholder" includes the owner of the policy or the
  person designated to pay  premiums  as  shown  on  the  records  of  the
  insurer.
    (4) The term "published monthly average" means:
    (A)  the  Monthly  Average Corporates yield shown in Moody's Corporate
  Bond Yield Averages published by Moody's Investors Service Inc., or  any
  successor thereto; or
    (B)  in  the  event  that the Moody's Corporate Bond Yield Averages --
  Monthly Average Corporates  is  no  longer  published,  a  substantially
  similar average, established by regulation issued by the superintendent.
    (b)  The  adjustable maximum rate of interest on policy loans for each
  policy will be determined at the  regular  intervals  specified  in  the
  policy. At the intervals specified in the policy:
    (1)  the rate being charged may be increased whenever such increase as
  determined under subsection (c)  hereof  would  increase  that  rate  by
  one-half per centum or more per annum; and
    (2)  the rate being charged must be reduced whenever such reduction as
  determined under subsection (c)  hereof  would  decrease  that  rate  by
  one-half per centum or more per annum.
    (c)  The  rate  of interest charged on a policy loan made under such a
  policy shall not exceed the higher of the following:
    (1) the published monthly average 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 centum per annum.   (d)
  The insurer shall for any such policy:
    (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 three hereof;
    (3) send to policyholders with loans reasonable advance notice of  any
  increase in the rate; and
    (4)  include  in  the  notices  required  above  the  substance of the
  pertinent policy provisions permitting an  adjustable  maximum  interest
  rate  on  policy  loans  established from time to time by the insurer as
  permitted by law, and specifying the frequency  at  which  the  interest
  rate is to be determined by the insurer as permitted by law.
    (e)  No  policy shall terminate in a policy year as the sole result of
  change in the interest rate during that policy  year,  and  the  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.
    (f) Participating policies issued under the provisions of this section
  shall constitute one or more dividend classifications, as established by
  the   board   of  directors  of  the  insurer,  separate  from  dividend
  classifications established for other participating policies  issued  by
  the insurer.
    (g)  No provision of law regulating the maximum rate of interest which
  may be charged, taken or received, other than section 190.40 or  section
  190.42  of  the  penal  law shall apply to any loan made pursuant to the
  provisions of this section.
    (h) The provisions of this section shall not be made to apply  to  any
  policy issued before January first, nineteen hundred eighty-three unless
  the  policyholder  agrees  in  writing  to  the  applicability  of  such
  provisions. Any holder of a policy issued before January first, nineteen
  hundred eighty-three which is of  a  classification  determined  by  the
  insurer  as  eligible  may request the insurer to make the provisions of
  this section applicable to such policy; the superintendent  may  require
  justification of the eligibility standard determined by the insurer.