New York Laws
Article 32 - Insurance Contracts - Life, Accident and Health, Annuities
3206 - Policies Which Provide for an Adjustable Maximum Rate of Interest on Policy Loans.

(1) The term "policy" includes: (i) life insurance policies subject to
the provisions of item (ii) of subparagraph (F) of paragraph eight of
subsection (a) of section three thousand two hundred three of this
article, and (ii) annuity contracts subject to the provisions of
subsection (c) of section three thousand two hundred nineteen of this
article, and (iii) certificates issued by a fraternal benefit society
subject to the provisions of paragraph six of subsection (a) of section
four thousand five hundred ten of this chapter, and (iv) annuity
certificates subject to section four thousand five hundred thirteen of
this chapter, when such policies, contracts, or certificates provide for
loans with adjustable rates of interest.
(2) The term "policy loan" includes any cash loans and any premium
loans made under a policy to pay one or more premiums that were not paid
to the life insurer as they fell due.
(3) The term "policyholder" includes the owner of the policy or the
person designated to pay premiums as shown on the records of the
insurer.
(4) The term "published monthly average" means:
(A) the Monthly Average Corporates yield shown in Moody's Corporate
Bond Yield Averages published by Moody's Investors Service Inc., or any
successor thereto; or
(B) in the event that the Moody's Corporate Bond Yield Averages --
Monthly Average Corporates is no longer published, a substantially
similar average, established by regulation issued by the superintendent.
(b) The adjustable maximum rate of interest on policy loans for each
policy will be determined at the regular intervals specified in the
policy. At the intervals specified in the policy:
(1) the rate being charged may be increased whenever such increase as
determined under subsection (c) hereof would increase that rate by
one-half per centum or more per annum; and
(2) the rate being charged must be reduced whenever such reduction as
determined under subsection (c) hereof would decrease that rate by
one-half per centum or more per annum.
(c) The rate of interest charged on a policy loan made under such a
policy shall not exceed the higher of the following:
(1) the published monthly average for the calendar month ending two
months before the date on which the rate is determined; or
(2) the rate used to compute the cash surrender values under the
policy during the applicable period plus one per centum per annum.
(d) The insurer shall for any such policy:
(1) notify the policyholder at the time a cash loan is made of the
initial rate of interest on the loan;
(2) 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 paragraph three hereof;
(3) send to policyholders with loans reasonable advance notice of any
increase in the rate; and
(4) include in the notices required above the substance of the
pertinent policy provisions permitting an adjustable maximum interest
rate on policy loans established from time to time by the insurer as
permitted by law, and specifying the frequency at which the interest
rate is to be determined by the insurer as permitted by law.
(e) No policy shall terminate in a policy year as the sole result of
change in the interest rate during that policy year, and the 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.
(f) Participating policies issued under the provisions of this section
shall constitute one or more dividend classifications, as established by
the board of directors of the insurer, separate from dividend
classifications established for other participating policies issued by
the insurer.
(g) No provision of law regulating the maximum rate of interest which
may be charged, taken or received, other than section 190.40 or section
190.42 of the penal law shall apply to any loan made pursuant to the
provisions of this section.
(h) The provisions of this section shall not be made to apply to any
policy issued before January first, nineteen hundred eighty-three unless
the policyholder agrees in writing to the applicability of such
provisions. Any holder of a policy issued before January first, nineteen
hundred eighty-three which is of a classification determined by the
insurer as eligible may request the insurer to make the provisions of
this section applicable to such policy; the superintendent may require
justification of the eligibility standard determined by the insurer.

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