Sec.38a-458-9. Financing options; cash values; policy loans; death benefits

(a) Financing options.

(1) The insurer may require a premium charge or cost of insurance charge; or

(2) 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 calculation shall be no greater than the maximum loan rate specified on currently issued policies; or

(3) The insurer may accrue an interest charge on the amount of the long-term care benefits at an interest rate no greater than the loan rate on currently issued policies.

(b) Effect on cash value.

(1) Except as provided in subdivision (2) of this subsection, when long-term care benefits are payable, there shall be no more than a pro-rata reduction in the cash value based on the percentage of benefits payments.

(2) Alternatively, the payment of long-term care benefits, any administrative expense charges, any future premiums and any accrued interest can be considered a lien against the death benefit of the policy or rider and the access to the cash value 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 would also be limited to the excess of the cash value over the sum of the lien and any other outstanding policy loans.

(c) Effect of any outstanding policy loans on long-term care benefits payment.

(1) When a payment of long-term care benefits results in a pro-rata reduction in the cash value, the payment may first be applied toward repaying a pro-rata portion of any outstanding policy loan.

(2) If the lien approach is used, any long-term care benefits payment may first be applied toward repaying the portion of any other outstanding policy loans which cause the sum of the long-term care benefits and policy loans to exceed the cash value.

(d) The death benefit may not be reduced more than the amount of the long-term care benefits adjusted for any applicable actuarial discount or accrued interest appropriate to the policy design plus any administrative expense charge for policies without additional payments. The accidental death benefit provision, if any, shall not be affected by the payment of the long-term care benefits.

(Effective April 27, 1992)