A. There shall be a provision that after three (3) 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 rate of interest not exceeding that allowable under Section 375 [59A-20-10 NMSA 1978] of this article, an amount equal to or, at the option of the party entitled thereto, less than the loan value of the policy. Before approving any policy language providing for a rate of interest in excess of eight percent, the superintendent shall require certification by the insurer that the holders of such policies will benefit through higher dividends or lower premiums, or both. The interest rate provided for by this section shall not impair the terms and conditions of any policy in force before the effective date of the Insurance Code. 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. 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 (6) months after application therefor. The policy, at the insurer's option, may provide for automatic premium loan, subject to an election of the party entitled to elect.

B. This section shall not apply to term policies nor to term insurance benefits provided by rider or supplemental policy provisions, or to industrial life insurance policies.

History: Laws 1984, ch. 127, § 374.

Effective dates. — Laws 1984, ch. 127, § 999 made the Insurance Code effective January 1, 1985.

Am. Jur. 2d, A.L.R. and C.J.S. references. — Right of beneficiary as against estate of insured who borrowed on the policy, 31 A.L.R.2d 979.

Right of creditors of life insured as to options or other benefits available to him during his lifetime, 37 A.L.R.2d 268.