26.1-33.4-09. Disclosure to insurer

26.1-33.4-09. Disclosure to insurer

Without limiting the ability of an insurer from assessing the insurability of a policy applicant

and determining whether to issue the policy, and in addition to other questions an insurance

carrier may lawfully pose to a life insurance applicant, insurance carriers 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.

1. If, as described in subsection 11 of section 26.1-33.4-01, the loan provides funds that

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 must be rejected as a violation of the prohibited practices in section

26.1-33.4-12.

2. If the financing does not violate section 26.1-33.4-12 in this manner, the insurance

carrier:

a. May make disclosures, such as the following, 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: "If you have entered 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:

(1) A change of ownership could lead to a stranger owning an interest in the

insured's life;

(2) 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 life;

(3) 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, and other factors may reduce the

ability to obtain coverage and may result in significantly higher premiums;

and

(4) You should consult a professional adviser, 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

b. May require certifications, such as the following, from the applicant or the insured

or both:

I have not entered into any agreement or arrangement providing for the

future sale of this life insurance policy;

My loan arrangement for this policy provides funds sufficient to pay for

some or all of the premiums, costs, and expenses 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.