PARRIS N. GLENDENING, Governor

Ch. 11

EACH POLICY OF LIFE INSURANCE SHALL CONTAIN A PROVISION THAT, ON
PROPER ASSIGNMENT OR PLEDGE OF THE POLICY AND ON THE SOLE SECURITY OF
THE POLICY, THE INSURER SHALL ADVANCE AN AMOUNT EQUAL TO, OR AT THE
OPTION OF THE PARTY ENTITLED TO THE ADVANCE, AN AMOUNT NOT EXCEEDING
THE LOAN VALUE OF THE POLICY:

(1)      AFTER PREMIUMS HAVE BEEN PAID FOR AT LEAST 3 YEARS;

(2)      AFTER THE POLICY HAS A CASH SURRENDER VALUE; AND

(3)      WHILE NO PREMIUM IS IN DEFAULT BEYOND THE GRACE PERIOD.

(C)     INTEREST.

(1)      EXCEPT AS PROVIDED IN PARAGRAPH (2) OF THIS SUBSECTION AND
SUBJECT TO § 16-208 OF THIS SUBTITLE, THE INSURER MAY CHARGE INTEREST ON
THE ADVANCE AT A RATE SPECIFIED IN THE POLICY NOT EXCEEDING AN
EFFECTIVE RATE OF 6% PER YEAR.

(2)      THE COMMISSIONER MAY AUTHORIZE AN INTEREST RATE
EXCEEDING AN EFFECTIVE RATE OF 6% BUT NOT EXCEEDING 8% PER YEAR IF THE
COMMISSIONER FINDS THAT A GREATER RATE WILL REDUCE THE NET COST OF LIFE
INSURANCE OFFERED BY THE INSURER IN DIRECT RELATIONSHIP TO THE REVENUE
FROM THE INCREASE.

(D)     LOAN VALUE OF POLICY.

(1)      SUBJECT TO PARAGRAPH (2) OF THIS SUBSECTION, THE LOAN
VALUE OF A POLICY SHALL AT LEAST EQUAL THE CASH SURRENDER VALUE OF THE
POLICY AT THE END OF THE CURRENT POLICY YEAR.

(2)      IN DETERMINING THE CASH SURRENDER VALUE OF A POLICY, THE
INSURER MAY DEDUCT FROM THE LOAN VALUE OR FROM THE PROCEEDS OF THE
LOAN:

(I)       ANY EXISTING INDEBTEDNESS TO THE INSURER NOT
ALREADY DEDUCTED INCLUDING ANY INTEREST THEN ACCRUED BUT NOT DUE;

(II)     ANY UNPAID BALANCE OF THE PREMIUM FOR THE CURRENT
POLICY YEAR; AND

(III)    INTEREST ON THE LOAN TO THE END OF THE CURRENT
POLICY YEAR.

(E)     INTEREST ON UNPAID INDEBTEDNESS; TERMINATION OF POLICY.
EACH POLICY MAY ALSO CONTAIN A PROVISION THAT:

(1)      INTEREST ON ANY INDEBTEDNESS THAT IS NOT PAID WHEN DUE
SHALL BE ADDED TO THE EXISTING INDEBTEDNESS AND SHALL BEAR INTEREST AT
THE SAME RATE; AND

(2)      THE POLICY TERMINATES IF:

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