# Title 45 — Insurance, Commissioner of

## Article 45-04 — Life Insurance

## Chapter 45-04-03 — Interest Rates on Life Insurance Policy Loans

### § 45-04-03-01. Purpose.

The purpose of this chapter is to permit and set guidelines for life insurers to include in life
insurance policies issued after January 1, 1982, a provision for periodic adjustment of policy loan
interest rates.
History: Effective January 1, 1982.
General Authority: NDCC 28-32
Law Implemented: NDCC 26.1-33-05
### § 45-04-03-02. Definitions.

For purposes of this chapter, the "published monthly average" means:
1. Moody's corporate bond yield average - monthly average corporates as published by Moody's
investors service, incorporated or any successor thereto; or
2. In the event that Moody's corporate bond yield average - monthly average corporates is no
longer published, a substantially similar average, established by regulation issued by the
commissioner.
History: Effective January 1, 1982.
General Authority: NDCC 28-32
Law Implemented: NDCC 26.1-33-05
### § 45-04-03-03. Maximum rate of interest on policy loans.

1. Policies issued on or after January 1, 1982, shall provide for policy loan interest rates as
follows:
a. A provision permitting a maximum interest rate of not more than eight percent per
annum; or
b. 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 subdivision b of subsection 1 shall
not exceed the higher of the following:
a. The published monthly average for the calendar month ending two months before the
date on which the rate is determined; or
b. The rate used to compute the cash surrender values under the policy during the
applicable period plus one percent per annum.
3. If the maximum rate of interest is determined pursuant to subdivision b of subsection 1, 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 months, but not more frequently than once in any three-month period. At the intervals
specified in the policy:
a. The rate being charged may be increased whenever such increase as determined under
subsection 2 would increase that rate by one-half percent or more per annum.
b. The rate being charged must be reduced whenever such reduction as determined under
subsection 2 would decrease that rate by one-half percent or more per annum.
5. The life insurer shall:
a. Notify the policyholder at the time a cash loan is made of the initial rate of interest on the
loan;
b. 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 subdivision c;
c. Send to policyholders with loans reasonable advance notice of any increase in the rate;
and
d. Include in the notices required above the substance of the pertinent provisions of
subsections 1 and 3.
6. No policy shall terminate in a policy year as the sole result of 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 otherwise have terminated if there had been no change during that
policy year.
7. The substance of the pertinent provisions of subsections 1 and 3 shall be set forth in the
policies to which they apply.
8. For purposes of this section:
a. The rate of interest on policy loans permitted under this section includes the interest rate
charged on reinstatement of policy loans for the period during and after any lapse of a
policy.
b. The term "policy" includes certificates issued by a fraternal benefit society and annuity
contracts which provide for policy loans.
c. The term "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 fell due.
d. The term "policyholder" includes the owner of the policy or the person designated to pay
premiums as shown on the records of the life insurer.
History: Effective January 1, 1982.
General Authority: NDCC 28-32
Law Implemented: NDCC 26.1-33-05
### § 45-04-03-04. Applicability to existing policies.

The provisions of this chapter shall not apply to any insurance contract issued before January 1,
1982, unless the policyholder agrees in writing to the applicability of such provisions.

History: Effective January 1, 1982.
General Authority: NDCC 28-32
Law Implemented: NDCC 26.1-33-05
