Current through Register Vol. 42, No. 5, February 29, 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.
