Rhode Island General Laws
Chapter 27-4 - Life Insurance Policies and Reserves
Section 27-4-13.1. - Policy loan interest rates.

§ 27-4-13.1. Policy loan interest rates.
(a) “Published monthly average” means:
(1) Moody’s corporate bond yield average — monthly average corporates, as published by Moody’s Investors Service, Inc. or any successor; or
(2) In the event that the Moody’s corporate bond yield average — monthly average corporates is no longer published, a substantially similar average, established by regulation issued by the commissioner.
(b)(1) Policies issued on or after May 25, 1982, shall provide for policy loan interest rates as follows:
(i) A provision permitting a maximum interest rate of not more than eight percent (8%) per annum; or
(ii) 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 paragraph (1)(ii) of this subsection shall not exceed the higher of the following:
(i) The published monthly average for the calendar month ending two (2) months before the date on which the rate is determined; or
(ii) The rate used to compute the cash surrender values under the policy during the applicable period plus one percent (1%) per annum.
(3) If the maximum rate of interest is determined pursuant to paragraph (1)(ii) of this subsection, 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 (12) months, but not more frequently than once in any three (3) month period. At the intervals specified in the policy:
(i) The rate being charged may be increased when an increase as determined under subdivision (2) of this subsection would increase that rate by one half of one percent (.5%) or more per annum;
(ii) The rate being charged must be reduced when a reduction as determined under subdivision (2) of this subsection would decrease that rate by one half of one percent (.5%) or more per annum.
(5) The life insurer shall:
(i) Notify the policyholder at the time a cash loan is made of the initial rate of interest on the loan;
(ii) 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 does not need to be given to the policyholder when a further premium loan is added, except as provided in paragraph (iii) of this subdivision;
(iii) Send to policyholders with loans reasonable advance notice of any increase in the rate; and
(iv) Include in the notices required in this subdivision the substance of the pertinent provisions of subdivisions (1) and (3) of this subsection.
(6) No policy shall terminate in a policy year as the sole result of a 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 have terminated if there had been no change during that policy year.
(7) The substance of the pertinent provisions of subdivisions (1) and (3) of this subsection shall be set forth in the policies to which they apply.
(8) For purposes of this section:
(i) The rate of interest on policy loans permitted under this section includes the interest rate charged on the reinstatement of policy loans for the period during and after any lapse of a policy;
(ii) “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 became due;
(iii) “Policyholder” includes the owner of the policy or the person designated to pay premiums as shown on the records of the life insurer; and
(iv) “Policy” includes certificates issued by a fraternal benefit society and annuity contracts that provide for policy loans.
(9) No other provision of law shall apply to policy loan interest rates unless made specifically applicable to those rates.
(c) The provisions of this section shall not apply to any insurance contract issued before May 25, 1982, unless the policyholder agrees in writing to the applicability of this section.
History of Section.P.L. 1982, ch. 410, § 1; P.L. 2002, ch. 292, § 12.