HARRY HUGHES, Governor

1933

BY repealing and reenacting, with amendments,

Article 48ft — Insurance Code

Section 394(a)

Annotated Code of Maryland

(1972 Replacement Volume and 1978 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be repealed, amended, or enacted to read as follows: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 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 insurer 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, an amount equal to or, at the option of the party
entitled thereto, less than the loan value of the policy.
The Commissioner 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 BY REGISTERED MAIL 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 the granting of a loan,
other than for the payment of any premium to the insurer,
for six months after application therefor. [The] EXCEPT FOR
THOSE POLICIES FOR WHICH THE PREMIUMS ARE PAID WEEKLY, THE
policy shall provide for automatic premium loan, subject to
an election of the party entitled to elect.