New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter III - Policy and Certificate Provisions
Subchapter A - Life, Accident and Health Insurance
Part 43 - Individual Life Insurance Market-value Adjustment
Section 43.4 - Policy loans

(a) Every policy shall contain a provision entitling the policyholder to a loan while the policy is in force in an amount not exceeding the policy loan value and under the conditions specified in the policy and this section, provided three full years' premiums have been paid or, in the case of single premium or flexible premium policies, after three years from the issue of the policy, if the policy is not in default.

(b) The amount of the loan shall bear interest not in excess of the maximum rate or adjustable maximum rate permitted by sections 3203 (a)(8)(F), 3206 and 4510 of the Insurance Law. If the loan is made or repaid on a date other than the anniversary of the policy, the company may collect interest for the portion of the current policy year on a pro rata basis.

(c) Any indebtedness shall be deducted from the policy proceeds on death.

(d) In determining cash surrender benefits or other nonforfeiture benefits under a policy, any indebtedness shall be deducted from the amount of the market-value adjusted cash surrender value.

(e) A policy may provide that if interest on a loan is not paid when due, it shall be added to the existing loan, and shall bear interest at the applicable rate or rates payable on the loan determined in accordance with the provisions of the policy.

(f) A policy may provide that when the indebtedness equals or exceeds the cash surrender value and if prior notice shall have been given in the manner herein provided, then the policy shall terminate and become void; provided, however, no policy shall terminate in a policy year as the sole result of a change in the policy loan interest rate during that policy year, and the company shall maintain coverage during that policy year until the time at which the policy would otherwise have terminated if there had been no change during that year. The notice provided by the company shall be mailed to the last known address of the policyholder and shall state the company's intent to terminate the policy if the amount by which the indebtedness exceeds the cash surrender value on a date specified in the notice is not paid within a period of not less than 31 days after the date of mailing of such notice.

(g) When a loan is made under a policy, an amount (which after adjustment in accordance with the market-value adjustment formula is equal to the loan) is subtracted from the nonborrowed portion of the policy value and an amount equal to the loan is established in, or added to, the loan account portion of the policy value. Any loan repayments will diminish the loan account by an equal amount and shall be treated in the same manner as a current premium remittance (but without charging additional expense loads or adding additional surrender charges) for purposes of determining future market-value adjustments, cash surrender benefits and policy loan values. (See examples 6 and 9 in section 43.9[c] of this Part.)

(h) The policy shall describe how the market-value adjustment formula affects policy loans and loan accounts and how policy loans and payments of indebtedness affect cash surrender benefits.

(i) In crediting interest to the loan account under a policy, the guaranteed rate may be reduced so that the total amounts credited to the loan account are credited at a rate that is up to two percent less than the applicable loan interest rate charged (but not less than the long-term contractual minimum guaranteed rate) or at such other rate as the superintendent, upon the company's demonstrating justification therefor, may allow.