N.M. Admin. Code § 13.9.8.19 - POLICY LOAN PROVISIONS

Every variable life insurance policy, other than term insurance policies and pure endowment policies, delivered or issued for delivery in this state shall contain provisions which are not less favorable to the policyholder than a provision for policy loans after the policy has been in force for three (3) full years which provides the following:

A. at least 75% of the policy's cash surrender value may be borrowed at the end of the current policy year;

B. the amount borrowed shall bear interest at a rate not to exceed that permitted by state insurance law;

C. any indebtedness shall be deducted from the proceeds payable on death;

D. any indebtedness shall be deducted from the cash surrender value upon surrender or in determining any non-forfeiture benefit;

E. for scheduled premium policies, whenever the indebtedness exceeds the cash surrender value, the insurer shall give notice of any intent to cancel the policy if the excess indebtedness is not repaid within thirty-one days after the date of mailing of such notice; for flexible premium policies, whenever the total charges authorized by the policy that are necessary to keep the policy in force until the next following processing day exceed the amounts available under the policy to pay such charges, a report must be sent to the policy holder containing the information specified by 13 NMAC 9.8.18 or 13 NMAC 9.8.36 [now 13.9.8.18 NMAC or 13.9.8.36 NMAC];

F. the policy may provide that if, at any time, so long as premiums are duly paid, the variable death benefit is less than it would have been if no loan or withdrawal had ever been made, the policyholder may increase such variable death benefit up to what it would have been if there had been no loan or withdrawal by paying an amount not exceeding 110% of the corresponding increase in cash value and by furnishing such evidence of insurability as the insurer may request;

G. the policy may specify a reasonable minimum amount which may be borrowed at any time but such minimum shall not apply to any automatic premium loan provision;

H. no policy loan provision is required if the policy is under extended insurance non-forfeiture option;

I. the policy loan provisions shall be constructed so that variable life insurance policyholders who have not exercised such provisions are not disadvantaged by the exercise thereof; and

J. amounts paid to the policyholders upon the exercise of any policy loan provision shall be withdrawn from the separate account and shall be returned to the separate account upon repayment except that a stock insurer may provide the amounts for policy loans from the general account.

Notes

N.M. Admin. Code § 13.9.8.19

12/1/85; Recompiled 11/30/01