The National Conference of Insurance Legislators has posted a draft of a model bill that would require life insurers to tell some policy owners about the life settlement option.
The life settlement option notice bill draft was developed by Kentucky state Rep. Ronald Crimm, R-Louisville, Ky.
NCOIL, Troy, N.Y., says its Life Insurance and Financial Planning Committee could consider the draft Nov. 19.
Kentucky is one of a number of states that have laws requiring insurers to tell policyholders about the life settlement option when policyholders are considering cashing in or terminating a life policy. Other states with similar requirements include California, New Hampshire, Maine, Florida and Washington.
In July, when NCOIL reported that Crimm, a former insurance agency owner, was working on the model, he said he had never sold a life settlement.
But settlements are “a recognized option and should be included in the policy language, because it is legitimate,” Crimm said at the time.
The draft calls for each state’s insurance commissioner to provide a model notice. “The notice shall be developed at no cost to insurers or other licensees and shall be written in lay terms,” according to the draft text.
In addition to telling a policyholder about the life settlement option, the notice must tell the policyholder about other alternatives to letting a policy lapse, such as seeking an accelerated death benefit and assigning a policy as a gift.