N.Y. Insurance Law Section 3206
Policies which provide for an adjustable maximum rate of interest on policy loans


(a)

In this section:

(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 § 3203 (Individual life insurance policies)section three thousand two hundred three of this article, and

(ii)

annuity contracts subject to the provisions of subsection (c) of § 3219 (Annuity and pure endowment contracts and certain group annuity certificates)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 § 4510 (Life insurance certificates)section four thousand five hundred ten of this chapter, and

(iv)

annuity certificates subject to § 4513 (Annuity certificates)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.

Source: Section 3206 — Policies which provide for an adjustable maximum rate of interest on policy loans, https://www.­nysenate.­gov/legislation/laws/ISC/3206 (updated Feb. 20, 2015; accessed Jun. 15, 2024).

3201
Approval of life, accident and health, credit unemployment, and annuity policy forms
3202
Withdrawal of approval of policy forms
3203
Individual life insurance policies
3204
Policy to contain entire contract
3205
Insurable interest in the person
3206
Policies which provide for an adjustable maximum rate of interest on policy loans
3207
Life insurance contracts by or for the benefit of minors
3208
Antedating of life insurance policies and burial agreements prohibited
3209
Life insurance, annuities and funding agreements disclosure requirements
3210
Incontestability after reinstatement
3211
Notice of premium due under life or disability insurance policy
3212
Exemption of proceeds and avails of certain insurance and annuity contracts
3213
Payment of proceeds
3214
Interest upon proceeds of life insurance policies and annuity contracts
3215
Disability benefits in connection with life insurance and annuities
3216
Individual accident and health insurance policy provisions
3217
Minimum standards in the form, content and sale of accident and health insurance
3217‑A
Disclosure of information
3217‑B
Prohibitions
3217‑C
Primary and preventive obstetric and gynecologic care
3217‑D
Grievance procedure and access to specialty care
3217‑E
Choice of health care provider
3217‑F
Prohibition on lifetime and annual limits
3217‑G
Maternal depression screenings
3217‑H
Telehealth delivery of services
3217‑I
Essential health benefits package and limit on cost-sharing
3217‑J
Utilization review determinations for medically fragile children
3218
Medicare supplemental insurance policies
3219
Annuity and pure endowment contracts and certain group annuity certificates
3220
Group life insurance policies
3221
Group or blanket accident and health insurance policies
3222
Funding agreements
3223
Group annuity contracts
3224
Standard claim forms
3224‑A
Standards for prompt, fair and equitable settlement of claims for health care and payments for health care services
3224‑B
Rules relating to the processing of health claims and overpayments to physicians
3224‑C
Coordination of benefits
3224‑D
Prescription synchronization
3225
Eligibility for health insurance in cases of exposure to DES
3226
Reinsurance contracts excepted
3227
Interest upon surrenders, policy loans and other funds
3228
Individual accident and health insurance policies
3229
Minimum benefit standards for certain long term care plans
3230
Accelerated payment of the death benefit or special surrender value under a life insurance policy
3231
Rating of individual and small group health insurance policies
3231*2
Health insurance policies and subscriber contracts
3232
Pre-existing condition provisions in health policies
3232‑A
Certification of creditable coverage
3233
Stabilization of health insurance markets and premium rates
3234
Pre-existing condition provisions in group and blanket disability policies
3234*2
Limitations on administrative services and stop-loss coverage
3235
Explanation of benefits forms relating to claims under medicare supplemental insurance policies and limited benefits health insurance pol...
3236
Public health law assessments
3237
Health insurance coverage for full-time students on medical leaves of absence
3238
Pre-authorization of health care services
3239
Wellness programs
3240
Unclaimed benefits
3240*2
Student accident and health insurance
3241
Network coverage
3242
Prescription drug coverage
3243
Discrimination because of sex or marital status in hospital, surgical or medical expense insurance
3244
Explanation of benefits forms relating to claims under certain accident and health insurance policies
3245
Liability to providers in the event of an insolvency

Accessed:
Jun. 15, 2024

Last modified:
Feb. 20, 2015

§ 3206’s source at nysenate​.gov

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