Current through Supplement No. 394, October, 2024
1. Policies issued on or after January 1,
1982, shall provide for policy loan interest rates as follows:
a. A provision permitting a maximum interest
rate of not more than eight percent per annum; or
b. A provision permitting an adjustable
maximum interest rate established from time to time by the life insurer as
permitted by law.
2.
The rate of interest charged on a policy loan made under subdivision b of
subsection 1 shall not exceed the higher of the following:
a. The published monthly average for the
calendar month ending two months before the date on which the rate is
determined; or
b. The rate used to
compute the cash surrender values under the policy during the applicable period
plus one percent per annum.
3. If the maximum rate of interest is
determined pursuant to subdivision b of subsection 1, the policy shall contain
a provision setting forth the frequency at which the rate is to be determined
for that policy.
4. The maximum
rate for each policy must be determined at regular intervals at least once
every twelve months, but not more frequently than once in any three-month
period. At the intervals specified in the policy:
a. The rate being charged may be increased
whenever such increase as determined under subsection 2 would increase that
rate by one-half percent or more per annum.
b. The rate being charged must be reduced
whenever such reduction as determined under subsection 2 would decrease that
rate by one-half percent or more per annum.
5. The life insurer shall:
a. Notify the policyholder at the time a cash
loan is made of the initial rate of interest on the loan;
b. 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 subdivision c;
c. Send
to policyholders with loans reasonable advance notice of any increase in the
rate; and
d. Include in the
notices required above the substance of the pertinent provisions of subsections
1 and 3.
6. No policy
shall terminate in a policy year as the sole result of change in the interest
rate during that policy year, and the life 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.
7. The substance of the pertinent provisions
of subsections 1 and 3 shall be set forth in the policies to which they apply.
8. For purposes of this section:
a. The rate of interest on policy loans
permitted under this section includes the interest rate charged on
reinstatement of policy loans for the period during and after any lapse of a
policy.
b. The term "policy"
includes certificates issued by a fraternal benefit society and annuity
contracts which provide for policy loans.
c. The term "policy loan" includes any
premium loan made under a policy to pay one or more premiums that were not paid
to the life insurer as they fell due.
d. The term "policyholder" includes the owner
of the policy or the person designated to pay premiums as shown on the records
of the life insurer.
General Authority: NDCC 28-32
Law Implemented: NDCC
26.1-33-05
