N.Y. Comp. Codes R. & Regs. tit. 11 § 41.4

Current through Register Vol. 46, No. 45, November 2, 2024

Section 41.4 - Disclosure

(a)

(1) The preliminary information required pursuant to Insurance Law section 3209(d) and all sales illustrations for the accelerated payment of death benefits pursuant to Insurance Law section 1113(a)(1)(A) or (B) shall at the insurer's option provide for either:

(i) an individualized illustration based on the policy being purchased or considered for purchase. The illustration shall demonstrate the acceleration based on 50 percent of the maximum benefit specified in the policy as available for acceleration, illustrate by numerical example the effect on the policy's face amount, specified amount, death benefit, accumulation account, cash values, loan balance, premium payments, availability of policy loans and partial withdrawals. The illustration shall demonstrate the benefit as being paid as of the earlier of 10 years from the date of issue or at the insured's age 75 but in no event earlier than five years from the date of issue. The illustration shall be accompanied by a brief description of the benefit and the qualifying events for payment of benefits; or

(ii) a generic illustration demonstrating the manner in which the benefit operates. The illustration shall demonstrate the acceleration based on 50 percent of the maximum benefit as permitted by the insurer for acceleration, illustrate by numerical example the effect on the policy's face amount, specified amount, death benefit, accumulation account, cash values, loan balance, premium payments, availability of policy loans and partial withdrawals. The illustration shall demonstrate the benefit for an issue age of 45 with acceleration at age 55. The illustration shall be accompanied by a brief description of the benefit and the qualifying events for payment of benefits.

(2) If the accelerated payment of the death benefits provides for a discounting feature, then the illustration shall be based on a mortality assumption that death will occur within one year of such other mortality basis on file with the superintendent and an interest rate of eight percent. If the accelerated payment of the death benefits provides for an interest accrual under the lien approach, then the illustration shall be based on an interest rate of eight percent.

(b) The preliminary information required pursuant to Insurance Law section 3209(d) and all sales illustrations shall:

(1) for the accelerated payment of death benefits pursuant to Insurance Law section 1113(a)(1)(C), (D), (E) or (F) at the insurer's option provide for either:

(i) an individualized illustration based on the policy being purchased or considered for purchase. The illustration shall demonstrate the acceleration based on the maximum benefit specified in the policy as available for acceleration, illustrate by numerical example the effect on the policy's face amount, specified amount, death benefit, accumulation account, cash values, loan balance, premium payments, availability of policy loans and partial withdrawals. The numerical example may show the effects of the acceleration on a monthly basis for a period not less than 12 months, or on a quarterly, semi-annual or annual basis for the entire benefit period. The illustration shall demonstrate the benefit as being paid as of the earlier of 10 years from the date of issue or at the insured's age 75 but in no event earlier than five years. The illustration shall be accompanied by a brief description of the benefit and the qualifying events for the payment of benefits; or

(ii) a generic illustration demonstrating the manner in which the benefit operates. The illustration shall demonstrate the acceleration based on the maximum benefit as permitted by the insurer for acceleration, illustrate by numerical example the effect on the policy's face amount, specified amount, death benefit, accumulation account, cash values, loan balance, premium payments, availability of policy loans and partial withdrawals. The numerical example may show the effects of the acceleration on a monthly basis for a period not less than 12 months, or on a quarterly, semi-annual or annual basis for the entire benefit period. The illustration shall demonstrate the benefit for an issue age of 45 with acceleration at age 55. The illustration shall be accompanied by a brief description of the benefit and the qualifying events for payment of benefits.

(2) for the accelerated payment of death benefits pursuant to Insurance Law section 1113(a)(1)(E) or (F), contain a prominent notice stating "Receipt of this type of accelerated death benefit is not expected to receive the same favorable tax treatment as other types of accelerated death benefits that may be available to you. Prior to applying for benefits, you should seek assistance from a qualified tax advisor."

(c)

(1) The application for a life insurance policy or an enrollment form for group life coverage providing for accelerated payment of death benefits pursuant to Insurance Law section 1113(a)(1)(A) or (B) or pursuant to Insurance Law section 1113(a)(1)(C) or (D) that is not intended to be a qualified long-term care insurance contract for Federal tax purposes shall contain a prominent notice stating "Receipt of accelerated death benefits may affect eligibility for public assistance programs and may be taxable." The notice, except for noncontributory group life coverage, shall also include the amount of any separate premium charge or cost of insurance charge. If no separate identifiable premium or cost of insurance charge is made, such notice shall disclose whether a discount or lien is associated with the acceleration and any administrative charge required upon the exercise of the benefit.

(2) The application for a life insurance policy or an enrollment form for group life coverage providing for accelerated payment of death benefits pursuant to Insurance Law section 1113(a)(1)(C) or (D) that is intended to be a qualified long-term care insurance contract for Federal tax purposes shall contain a prominent notice stating "Receipt of accelerated death benefits may affect eligibility for public assistance programs such as medical assistance (Medicaid), Aid to Families with Dependent Children and Supplemental Security Income and may be taxable."

(3) The application for a life insurance policy or an enrollment form for group life coverage providing for accelerated payment of death benefits pursuant to Insurance Law section 1113(1)(E) or (F) shall contain a prominent notice stating "Receipt of accelerated death benefits affects eligibility for public assistance programs and this type of accelerated death benefit is not expected to receive the same favorable tax treatment as other types of accelerated death benefits that may be available to you." The notice, except for noncontributory group life coverage, shall also include the amount of any separate premium charge or cost of insurance charge. If no separate identifiable premium or cost of insurance charge is made, the notice shall disclose whether a discount or lien is associated with the acceleration and any administrative charge required upon the exercise of the benefit.

(d) In the case of accelerated payment of death benefits pursuant to Insurance Law section 1113(a)(1)(E) or (F), the policy or rider on its face page shall state "Receipt of this type of accelerated death benefit is not expected to receive the same favorable tax treatment as other types of accelerated death benefits that may be available to you. Prior to applying for benefits, you should seek assistance from a qualified tax advisor."

(e) The application or claim form to accelerate the payment of the death benefit of a life insurance policy shall provide for the following:

(1) a notice prominently displayed to read "Receipt of accelerated death benefits may affect eligibility for public assistance programs such as medical assistance (Medicaid), Aid to Families with Dependent Children and Supplemental Security Income. Receipt of accelerated death benefits in periodic payments may be treated differently than receipt in a lump sum. Prior to applying for accelerated death benefits, (policyowners) (certificateholders) should consult with the appropriate social services agency concerning how receipt will affect the eligibility of the recipient and/or the recipient's spouse or dependents";

(2) a notice prominently displayed to read "Receipt of accelerated death benefits may be taxable. Receipt of accelerated death benefits in periodic payments may be treated differently than receipt in a lump sum. Prior to applying for such benefits, (policyowners) (certificateholders) should seek assistance from a qualified tax advisor". For policies that accelerate pursuant to Insurance Law section 1113(a)(1)(E) or (F), the disclosure shall further state "Receipt of this type of accelerated death benefit is not expected to receive the same favorable tax treatment as other types of accelerated death benefits that may be available to you";

(3) a statement by the policyowner or certificateholder that such application is voluntary and without coercion on the part of any third party;

(4) a statement that no health care facility as defined in Public Health Law section 20 can require any person to accelerate payment of a death benefit as a condition of admission to such health care facility or for providing any care in such facility;

(5) a statement setting forth the remaining death benefits, if any, available to the beneficiary;

(6) a notice that the insurer is prohibited from paying accelerated death benefits to the policyowner or certificateholder for a period of five days from the date on which the information specified in subdivision (f) of this section is transmitted in writing to the policyowner or certificateholder;

(7) the application shall be dated by the insurer upon transmittal and be completed and signed by the policyowner or certificateholder not more than 30 days thereafter;

(8) the application or claim form shall set forth the statements required by this subsection directly above the policyowner or certificateholder's signature. The notices required by this subdivision shall be set forth in the application or claim form used to apply for the acceleration of death benefits.

(f) Not later than five days after receipt of an application or claim form to accelerate the payment of the death benefit of a life insurance policy, the insurer shall provide the policyowner or certificateholder with the following:

(1) a numerical computation of the amount of the death benefit that has been requested to be accelerated and the amount to be paid in cash to the policyowner or the certificateholder;

(2) a numerical computation of the amount of the death benefit which would be payable upon death, if no part of the death benefit were accelerated;

(3) an illustration demonstrating the effect of the accelerated death benefit requested on the policy's face amount, specified amount, death benefit, premium payments, accumulation account, cash value, loan balance, and partial withdrawals as provided under the terms of the policy; and

(4) a notice that other means may be available to achieve the intended goal, including a policy loan.

(g) When the insurer agrees to accelerate the death benefits in a lump sum, the insurer shall issue a new policy or an amended schedule page to the policyowner or certificateholder or give written notification or an equivalent explanation of benefits statement to the certificateholder under a group life policy to reflect any new reduced in-force face amount and other values provided by the policy.

(h) [Reserved]

(i) When an insurer agrees to accelerate the death benefits in installments or in a lump sum under the lien approach, pursuant to Insurance Law section 1113(a)(1)(A) or (B), the insurer shall issue a report semiannually to the policyowner or certificateholder indicating the current face amount, the current specified amount, accumulation account, cash values, the current death benefit, and other values provided by the policy that are affected by the acceleration including premium requirements.

N.Y. Comp. Codes R. & Regs. Tit. 11 § 41.4

Amended New York State Register November 27, 2019/Volume XLI, Issue 48, eff. 11/27/2019