Current through Register Vol. 42, No. 11, August 30, 2024
(1) Financing
Options
(a) The insurer may require a premium
charge or cost of insurance charge for the accelerated benefit. These charges
shall be based on sound actuarial principles. In the case of group insurance,
the additional cost may also be reflected in the experience rating.
(b) The insurer may pay a present value of
the face amount. The calculation shall be based on any applicable actuarial
discount appropriate to the policy design. The interest rate or interest rate
methodology used in the calculation shall be based on sound actuarial
principles and disclosed in the contract or actuarial memorandum. The maximum
interest rate used shall be no greater than the greater of:
1. The current yield on 90 day treasury
bills; or
2. The current maximum
statutory adjustable policy loan interest rate.
(c) The insurer may accrue an interest charge
on the amount of the accelerated benefits. The interest rate or interest rate
methodology used in the calculation shall be based on sound actuarial
principles and disclosed in the contract or actuarial memorandum. The maximum
interest rate used shall be no greater than the greater of:
1. The current yield on 90 day treasury
bills; or
2. The current maximum
statutory adjustable policy loan interest rate.
The interest rate accrued on the portion of the lien which is
equal in amount to the cash value of the contract at the time of the benefit
acceleration shall be no more than the policy loan interest rate stated in the
contract.
(2) Effect on Cash Value.
(a) Except as provided in Rule
482-1-113-.11(2)(b),
when an accelerated benefit is payable, there shall be no more than a pro rata
reduction in the cash value based on the percentage of death benefits
accelerated to produce the accelerated benefit payment.
(b) Alternatively, the payment of accelerated
benefits, any administrative expense charges, any future premiums and any
accrued interest can be considered a lien against the death benefit of the
policy or rider and the access to the cash value may be restricted to any
excess of the cash value over the sum of any other outstanding loans and the
lien. Future access to additional policy loans could also be limited to any
excess of the cash value over the sum of the lien and any other outstanding
policy loans.
(3) Effect
of Any Outstanding Policy Loans on Accelerated Death Benefit Payment. When
payment of an accelerated benefit results in a pro rata reduction in the cash
value, the payment may not be applied toward repaying an amount greater than a
pro rata portion of any outstanding policy loans.
Author: Commissioner of Insurance
Statutory Authority:
Code of Ala.
1975, §
27-2-17.
