POLICY LOANS

(a) The following policies are not required to comply with this section: (1) a term life insurance policy; (2) a pure endowment contract issued or granted: (A) as an original contract; or (B) in exchange for a lapsed or surrendered policy; or (3) a policy that does not provide for cash values or nonforfeiture values and that meets the requirements of Section 884.403(b). (b) A life insurance policy must provide that the company that issues the policy will loan to the policy owner at a specified interest rate an amount equal to the sum of the policy's cash value and any dividend additions to the policy, or, at the policy owner's option, an amount less than that sum, if: (1) the policy is in force; (2) the premiums for the policy have been paid for at least three full years; and (3) the policy is properly assigned. (c) A life insurance policy must also provide that: (1) a policy loan is secured only by the policy; (2) the company may deduct from a policy loan the sum of the amount of existing debt on the policy and the balance of unpaid premiums for the current policy year; (3) the company may collect in advance interest on the policy loan to the end of the current policy year; and (4) failure to repay the policy loan or interest on the loan does not void the policy until the total amount owed under the loan equals or exceeds the policy's cash value. (d) A life insurance policy may provide that a policy loan may be deferred for a period not to exceed six months after the date the application for the loan is made. (e) A life insurance policy may not require a prerequisite to a policy loan if the prerequisite is not required or authorized by this section.