New Jersey Administrative Code
Title 11 - INSURANCE
Chapter 4 - ACTUARIAL SERVICES
Subchapter 30 - ACCELERATED DEATH BENEFITS
Section 11:4-30.6 - Lien
Universal Citation: NJ Admin Code 11:4-30.6
Current through Register Vol. 56, No. 6, March 18, 2024
(a) Under the lien approach, the payment to the owner of the accelerated death benefit is treated as a lien on the death benefits of the policy. Expense charges may be added to the lien. Due and unpaid premiums may be included in the lien after the automatic premium loan, if available, is exercised. Access to cash value may be restricted to the excess of the cash value over the sum of the lien and any other outstanding policy loans.
(b) The following requirements apply to accelerated death benefit provisions which utilize the lien approach.
1. The lien may only be made against the
death benefit, not against the cash value.
2. Interest bearing liens are permitted. The
interest rate accrued on the portion of the lien which is equal to the cash
value of the policy at the time of acceleration shall be no more than the
policy loan interest rate stated in the policy. For the amount of the lien in
excess of such cash value, the interest rate or interest rate methodology shall
be disclosed in the policy and actuarial memorandum. The maximum interest rate
for the lien in excess of cash value shall not exceed the greater of:
i. The yield on the 90-day Treasury bills
available on the date of application or of the accelerated payment, whichever
is greater; or
ii. The maximum
adjustable policy loan interest rate based on the Moody's Corporate Bond Yield
Averages-Monthly Average Corporates published by Moody's Investment Services,
Inc., or successor thereto, for the calendar month ending two months before the
date of application for an accelerated payment. The policy loan interest rate
is that which is permitted under the NAIC Model Policy Loan Interest Rate Bill,
Model #590.
3. The
amount of the lien and any interest thereon may not exceed the net amount at
risk, that is, death benefit less cash value. Interest shall not be charged on
the lien once the lien plus cumulative interest thereon equals the net amount
at risk.
4. Expense charges may be
added to the lien.
5. Due and
unpaid premiums may be included in the lien after the automatic premium loan,
if available, is exercised.
6.
Access to the policy or certificate cash value may be restricted to the excess
of the cash value over the sum of the lien and any other outstanding policy or
certificate loans.
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