KRS 304.15-110: Policy loans.

(1) 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 pl edge of the policy and on the sole security thereof, at a specified

rate of interest, an amount equal to or, at the option of the party entitled thereto, less

than the loan value of the policy. 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, and 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 i nterest 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, but not until at least

thirty (30) days after notice has been mailed by the insurer to the last address of

record with the insurer, of the insured or other policy owner and of any assignee of

record at the insurer's principal office. 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.

(2) This section shall not apply to term policies, or to term insurance benefits provided

by rider or supplemental policy provisions or to industrial life insurance policies.