NU Online News Service, Oct. 26, 1:45 p.m. – North Carolina has passed a law to protect residents who want to sell their life insurance to raise cash.
The law is aimed at preventing abuses of viatical settlements, whereby terminally or chronically ill people sell their paid-up insurance policies to provide living or medical expenses. State Insurance Commissioner Jim Long says the new law expand his department’s regulatory authority over such settlements and is aimed at protecting policyholders from unfair sales practices.
“Individuals in need of selling their death benefits are usually in very difficult and often desperate positions,” comments Long. “It is important that there be safeguards to protect their privacy and assure they understand what they are doing when they enter into a viatical settlement. It is also important to make certain the people who engineer these sales are legitimate.”
The new law requires the insurance commissioner’s approval of all viatical contracts as well as related advertising and disclosure statements. It is based on model legislation drafted by the National Association of Insurance Commissioners.
The law becomes effective April 1, 2002. It includes requirements ensuring that the person selling a policy consents to the contract, is of sound mind and is not under constraint or undue influence; and a requirement that viatical settlement providers and brokers keep the identity of insureds and their financial and medical information confidential except in specified circumstances.