Wisconsin Gov. Jim Doyle, D, has signed into law S.B. 513, which requires that a life insurance policy be in force at least five years before it can be sold in the life settlement market.
Positioned by supporters as legislation that combats stranger-originated life insurance, the bill changes the state’s older viatical settlements act, which had required only a two-year waiting period before a life policy could be sold.
S.B. 513 allows exceptions to the five-year rule, such as in cases when the policyowner has a life-threatening medical condition, the owner’s spouse or child has died, the owner gets divorced or the owner retires from full-time employment.
The law also:
–Eliminates a minimum payment tied to the life expectancy of an insured, which had been required under the old viatical law.
–Includes extensive anti-fraud provisions and requires providers and brokers to set up antifraud programs to detect, prosecute and prevent violations.
–Defines a life settlement as “an agreement regarding the terms under which compensation or anything of value will be paid…in return for the owner’s present or future assignment, transfer, sale, devise, or bequest of the death benefit or any interest in a policy.”
–Specifies the amount paid should be less than the expected death benefit but more than the cash surrender value or accelerated death benefit available under the policy at time of the life settlement application.