2260

LAWS OF MARYLAND

Ch. 773

BY repealing and reenacting, with amendments,

Article 48A - Insurance Code

Section 394

Annotated Code of Maryland

(1972 Replacement Volume and 1977 Supplement)

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF
MARYLAND, That section(s) of the Annotated Code of Maryland
be repealed, amended, or enacted to read as follows:

Article 48A — Insurance Code

394.

(a) There shall be a provision that after three [(3)]
full years' premiums have been paid and after the policy has
a cash surrender value and while no premium is in default
beyond the grace period for payment, the inusurer will
advance, on proper assignment or pledge of the policy and on
the sole security thereof, at a specified rate of interest
not exceeding an effective rate of [ six percent (6%) per

annum ] 8 PERCENT PER YEAR OR 7.4 PERCENT IF, PAID

ANNUALLY IN ADVANCE 7 PERCENT PER ANNUM, an amount equal to
or, at the option of the party entitled thereto, less than
the loan value of the policy. AS A CONDITION FOR APPROVAL OF

A POLICY LOAN INTEREST RATE IN EXCESS OF 6 PERCENT PER

ANNUM, THE COMMISSIONER MAY SHALL REQUIRE THE INSURER TO

FURNISH SUCH ASSURANCES AS HE DEEMS NECESSARY THAT THE

INTEREST RATE ON THESE LOANS WILL BEAR A REASONABLE

RELATIONSHIP TO OTHER INTEREST RATES AND IF THE POLICY LOAN

INTEREST RATE IS IN EXCESS OF 6 PERCENT PER ANNUM THAT THE

HOLDERS OF THESE POLICIES WILL BENEFIT THROUGH HIGHER
DIVIDENDS OR LOWER PREMIUMS, OR BOTH. MAY AUTHORIZE A RATE IN
EXCESS OF 6 PERCENT BUT NOT IN EXCESS OF 8 PERCENT PER ANNUM
UPON A FINDING THAT SUCH ACTION WILL REDUCE THE NET COST OF
LIFE INSURANCE OFFERED BY THE COMPANY IN DIRECT RELATIONSHIP

TO THE REVENUE FROM SUCH INCREASE. The loan value of the

policy shall be at least equal to the cash surrender value
at the end of the then current policy year, provided that
the insurer may deduct, either from such loan value or from
the proceeds of the loan, any existing indebtedness not
already deducted in determining such cash surrender value
including any interest then accrued but not due, any unpaid
balance of the premium for the current policy year, and
interest on the loan to the end of the current policy year.
The policy may also provide that if interest on any
indebtedness is not paid when due it shall then be added to
the existing indebtedness and shall bear interest at the
same rate, and that if and when the total indebtedness on
the policy, including interest due or accrued, equals or
exceeds the amount of the loan value thereof, then the
policy shall terminate and become void, but not until at
least 30 days notice shall have been mailed by the insurer
to the last known address of the insured or policy owner and
of any assignee of record at the home office of the insurer.
The policy shall reserve to the insurer the right to defer