(a) The insurer may require a premium charge or cost of insurance charge for the accelerated death benefit. This charge shall be based on sound actuarial principles. In the case of group insurance, the additional cost may also be reflected in the experience rating.
(b) (1) The insurer may pay a present value of the face amount. The calculation shall be based on any applicable actuarial discount appropriate to the policy design. The interest rate or interest rate methodology used in the calculation shall be based on sound actuarial principles and disclosed in the contract or actuarial memorandum required in Section 10295.4. The maximum interest rate used shall be no greater than the greater of one of the following:
(A) The current yield on 90-day treasury bills.
(B) The current maximum statutory adjustable policy loan interest rate.
(2) The interest rate accrued on the portion of the lien that is equal in amount to the cash value of the life insurance policy at the time of the supplemental benefit acceleration shall be not more than the policy loan interest rate stated in the contract.
(c) (1) Except as provided in paragraph (2), when an accelerated death benefit is payable, there shall not be more than a pro rata reduction in the cash value based on the percentage of death benefits accelerated to produce the accelerated death benefit payment.
(2) Alternatively, the payment of accelerated death benefits, any administrative expense charges, any future premiums, and any accrued interest can be considered a lien against the death benefit of the life insurance policy and access to the cash value of the life insurance policy may be restricted to any excess of the cash value over the sum of any other outstanding loans and the lien. Future access to additional policy loans may also be limited to any excess of the cash value over the sum of the lien and any other outstanding policy loans.
(d) When payment of an accelerated death benefit results in a pro rata reduction in the cash value of the life insurance policy, the payment shall not be applied toward repaying an amount greater than a pro rata portion of any outstanding policy loans.
(Added by Stats. 2013, Ch. 345, Sec. 7. (SB 281) Effective January 1, 2014.)
Last modified: October 25, 2018