§ 27-72-10 - Disclosure to insurer. [Effective July 1, 2010.]. - Rhode Island Statutes

SECTION 27-72-10

   § 27-72-10  Disclosure to insurer.[Effective July 1, 2010.]. – (a) Without limiting the ability of an insurer from assessing the insurabilityof a policy applicant and determining whether or not to issue the policy, andin addition to other questions an insurance carrier may lawfully pose to a lifeinsurance applicant, insurance carriers may inquire in the application forinsurance whether the proposed owner intends to pay premiums with theassistance of financing from a lender that will use the policy as collateral tosupport the financing.

   (1) If, as described in this chapter, the loan provides fundswhich can be used for a purpose other than paying for the premiums, costs, andexpenses associated with obtaining and maintaining the life insurance policyand loan, the application shall be rejected as a violation of the prohibitedpractices in § 27-72-13.

   (2) If the financing does not violate § 27-72-13, theinsurance carrier:

   (i) May make disclosures, including but not limited to suchas the following, to the applicant and the insured, either on the applicationor an amendment to the application to be completed no later than the deliveryof the policy:

   "If you have entered into a loan arrangement where the policyis used as collateral, and the policy does change ownership at some point inthe future in satisfaction of the loan, the following may be true:

   (A) A change of ownership could lead to a stranger owning aninterest in the insured's life;

   (B) A change of ownership could in the future limit yourability to purchase future insurance on the insured's life because there is alimit to how much coverage insurers will issue on one life;

   (C) Should there be a change of ownership and you wish toobtain more insurance coverage on the insured's life in the future, theinsured's higher issue age, a change in health status, and/or other factors mayreduce the ability to obtain coverage and/or may result in significantly higherpremiums;

   (D) You should consult a professional advisor, since a changein ownership in satisfaction of the loan may result in tax consequences to theowner, depending on the structure of the loan;" and

   (b) May require certifications, such as the following, fromthe applicant and/or the insured:

   (1) "I have not entered into any agreement or arrangementproviding for the future sale of this life insurance policy";

   (2) "My loan arrangement for this policy provides fundssufficient to pay for some or all of the premiums, costs, and expensesassociated with obtaining and maintaining my life insurance policy, but I havenot entered into any agreement by which I am to receive consideration inexchange for procuring this policy"; and

   (3) "The borrower has an insurable interest in the insured."