A variable life insurance policy, delivered or issued for
delivery in this Commonwealth, other than a term insurance policy or pure
endowment policy, shall contain a provision which provides for policy loans
after the policy has been in force for 3 full years. The provision for policy
loans may not be less favorable than the following:
(1) At least 75% of the cash surrender value
of the policy may be borrowed.
The amount borrowed shall bear interest at a rate not to exceed that permitted
by section 410F of the act (40 P. S. §
(3) An indebtedness shall be deducted from
the proceeds payable on death.
An indebtedness shall be deducted from the cash surrender value upon surrender
or in determining a nonforfeiture benefit.
For scheduled premium policies, whenever
the indebtedness exceeds the cash surrender value, the insurer shall give
notice of intent to cancel the policy if the excess indebtedness is not repaid
within 31 days after the date of mailing the 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 policy
processing day exceed the amounts available under the policy to pay the
charges, a report shall be sent to the policyholder containing the information
specified by §
(relating to warning statements for flexible premium policies).
(6) The policy may provide that if, at any
time, so long as premiums are paid, the variable death benefit is less than it
would have been if no loan or withdrawal had ever been made, then the
policyholder may increase the 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 evidence of
insurability that the insurer may request.
(7) The policy may specify a reasonable
minimum amount which may be borrowed at any time, but the minimum does not
apply to an automatic premium loan provision.
(8) A policy loan provision is not required
if the policy is under the extended insurance nonforfeiture option.
(9) The policy loan provisions shall be
construed so that variable life insurance policyholders who have not exercised
the provisions are not disadvantaged by the exercise thereof.
(10) 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the exercise of any policy loan provision shall be withdrawn from the separate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