ORS 743.187
Maximum interest rate on policy loan
- adjustable interest rate
(1)
Except as provided otherwise in this section, the maximum interest rate in the policy loan provision required by ORS 743.186 (Policy loan) shall be eight percent per year. The insurer may include in the policy loan provision, in lieu of a fixed maximum interest rate, a provision for an adjustable interest rate. The adjustable interest rate provision must comply with this section. A limitation on interest rates under state law, other than a limitation contained in the Insurance Code, shall not apply to interest rates for life insurance policy loans unless the limitation specifically applies to life insurance policy loans.(2)
The adjustable interest rate provision:(a)
Shall state in substance that in accordance with the policy and the law of the jurisdiction in which the policy is delivered, the insurer will establish from time to time the interest rate for an existing or a new policy loan; and(b)
Shall set forth the dates on which the insurer will determine policy loan interest rates. These determination dates shall be at regular intervals no longer than one year and no shorter than three months.(3)
The maximum interest rate permitted for a policy loan under the adjustable interest rate provision shall be established by the provision as the higher of:(a)
The interest rate used to calculate cash surrender values under the policy during the same period, plus one percent; and(b)
The Moody’s Corporate Bond Yield Average - Monthly Average Corporates, as published by Moody’s Investors Service, Inc., for the calendar month which precedes by two months the month in which the determination date for the policy loan interest rate falls. However, if the Moody’s Corporate Bond Yield Average - Monthly Average Corporates is no longer published by Moody’s Investors Service, Inc., or if the National Association of Insurance Commissioners determines that the Moody’s Corporate Bond Yield Average - Monthly Average Corporates is no longer an appropriate rate for this purpose, the Director of the Department of Consumer and Business Services by rule may establish the method of determining the rate under this paragraph. The director’s rule, to the maximum extent reasonable, shall be consistent with the pertinent actions of the National Association of Insurance Commissioners.(4)
On any date specified in the adjustable interest rate provision of the policy for determining the policy loan interest rate:(a)
The insurer may increase the existing rate if the maximum rate permitted by the provision exceeds the existing rate by at least one-half of one percent. The increase shall not be less than one-half of one percent or more than the amount by which the permitted maximum rate exceeds the existing rate; and(b)
The insurer shall decrease the existing rate if the existing rate exceeds the maximum rate permitted by the provision by at least one-half of one percent. The decrease shall not be less than the amount by which the existing rate exceeds the permitted maximum rate.(5)
The insurer under the adjustable interest rate provision shall give notice of the policy loan interest rate and related matters to the policy owner and all other persons entitled to notice by the policy, as follows:(a)
In the case of a loan other than for payment of a premium to the insurer, the insurer shall give notice of the initial interest rate on the loan when the loan is made.(b)
In the case of a loan for payment of a premium to the insurer, the insurer shall give notice of the initial interest rate on the loan as soon as reasonably practicable after the loan is made. However, the insurer need not give this notice when an additional premium loan is made at the same interest rate then applicable to an existing premium loan to the borrower.(c)
In the case of a policy with an outstanding loan, the insurer shall give notice of each increase in the loan interest rate reasonably in advance of the increase.(d)
Notices given under this subsection shall include in substance the information required by subsection (2) of this section.(6)
Notwithstanding ORS 743.186 (Policy loan), a policy shall not terminate in a particular policy year solely because a change in the policy loan interest rate during that year caused the total indebtedness under the policy to reach the policy loan value. The policy shall remain in force during that year unless and until it would have terminated in the absence of any policy loan interest rate change during that year. [1981 c.412 §20]
Source:
Section 743.187 — Maximum interest rate on policy loan; adjustable interest rate, https://www.oregonlegislature.gov/bills_laws/ors/ors743.html.
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