[§557A-407] Insurance policies and similar contracts. (a) Except as provided in subsection (b), proceeds from a life insurance policy or other contract whose beneficiary is the trust or its trustee, including a contract that insures the trust or its trustee against loss for the damage or destruction of, or loss of title to, a principal asset shall be allocated to principal. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal. This section shall not apply to a contract to which section 557A-409 applies.
(b) Insurance proceeds shall be allocated to income if they are from a policy that insures the trustee against the loss of occupancy or other use by an income beneficiary, the loss of income, or, subject to section 557A-403, the loss of profits from a business. [L 2000, c 191, pt of §1]