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304.15-702 Permitted questioning of life insurance applicant concerning
financing of premium payments.
(1)
In addition to other questions an insurer may lawfully pose to a life insurance
applicant, insurers may inquire in the application for insurance whether the
proposed owner intends to pay premiums with the assistance of financing from
a lender that will use the policy as collateral to support the financing.
(a) If, as described in KRS 304.15-020(17), the loan provides funds which
can be used for a purpose other than paying for the premiums, costs, and
expenses associated with obtaining and maintaining the life insurance
policy and loan, the application shall be rejected as a violation of the
prohibited practices in KRS 304.15-717.
(b) If the financing does not violate KRS 304.15-717 in this manner, the
insurer:
1.
May make disclosures to the applicant and the insured, either on the
application or an amendment to the application to be completed no
later than the delivery of the policy, which shall include but not be
limited to the following statement or a substantially similar
statement:
"If you have entered into a loan arrangement where the policy is
used as collateral, and the policy does change ownership at some
point in the future in satisfaction of the loan, the following may be
true:
a.
A change of ownership could lead to a stranger owning an
interest in the insured's life;
b.
A change of ownership could in the future limit your ability to
purchase future insurance on the insured's life because there
is a limit to how much coverage insurers will issue on one (1)
life;
c.
Should there be a change of ownership and you wish to obtain
more insurance coverage on the insured's life in the future, the
insured's higher issue age, a change in health status, or other
factors may reduce the ability to obtain coverage and may
result in significantly higher premiums; and
d.
You should consult a professional advisor, since a change in
ownership in satisfaction of the loan may result in tax
consequences to the owner, depending on the structure of the
loan."; and
2.
May require certifications from the applicant or the insured or both
which shall include but not be limited to the following statement or a
substantially similar statement:
"I certify that:
a.
I have not entered into any agreement or arrangement
providing for the future sale of this life insurance policy;
b.
My loan arrangement for this policy provides funds sufficient to
pay for some or all of the premiums, costs, and expenses
c.
associated with obtaining and maintaining my life insurance
policy, but I have not entered into any agreement by which I
am to receive consideration in exchange for procuring this
policy; and
The borrower has an insurable interest in the insured."
Effective:July 15, 2008
History: Created 2008 Ky. Acts ch. 32, sec. 5, effective July 15, 2008.
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