CA Ins Code § 10235.45 (2021)
2021 California Code|Insurance Code - INS|DIVISION 2 - CLASSES OF INSURANCE|PART 2 - LIFE AND DISABILITY INSURANCE|CHAPTER 2.6 - Long-Term Care Insurance|ARTICLE 4 - Implementation|Section 10235.45.

10235.45.  (a) If a life insurance policy issued on or after January 1, 2021, contains long-term care benefits and permits policy loans or cash withdrawals, then access to those loans or withdrawals shall not be prohibited or limited due to the payment of long-term care benefits, except as provided in paragraphs (1) and (2).(1) Payment of an accelerated death benefit for long-term care shall result in no more than a pro rata reduction in the cash value of the life insurance policy. A reduction in cash value shall be proportionally equal to the percentage of death benefits accelerated to produce the accelerated death benefit payment. Future access to policy loans and cash withdrawals may be limited to the remaining cash value.(2) Notwithstanding paragraph (1), payment of an accelerated death benefit for long-term care may be considered a lien against the death benefit of the life insurance policy, and access to the cash value of the life insurance policy may be restricted to the excess of the cash value over the sum of outstanding policy loans and the lien. Future access to policy loans and cash withdrawals may also be limited to the excess of the cash value over the sum of outstanding policy loans and the lien.(b) If payment of an accelerated death benefit for long-term care results in a pro rata reduction in the cash value of the life insurance policy, the payment may be applied toward repayment of a pro rata portion of outstanding policy loans. The amount of the loan repayment shall be proportionally equal to the percentage of death benefits accelerated to produce the accelerated death benefit payment.(c) At least 30 days before the first payment of an accelerated death benefit for long-term care, the insurer shall send the policyholder or certificate holder a statement that includes all of the following:(1) The scheduled payment date and an option to cancel the payment before the payment date. The policyholder or certificate holder may cancel the payment by contacting the insurer at the insurer’s address or telephone number at any time before the payment date.(2) An explanation of changes to the policy that would occur as a result of the payment, including, but not limited to, a prohibition or limitation of access to loans or cash withdrawals.(3) A numerical demonstration of the effect of the payment on the remaining death benefit, cash value or accumulation amount, policy loan value, outstanding policy loan amount, no-lapse guarantee, policy lien, and premium payments or cost of insurance charges.(4) A notice stating: “WARNING: Payment of an accelerated death benefit for long-term care will reduce and may potentially eliminate your death benefit. Receipt of an accelerated death benefit for long-term care may be taxable and may also adversely affect your eligibility for Medicaid or other government entitlements. Please consult a financial advisor.”(d) The statement required by subdivision (c) is required only once per policy, or once per policyholder if a policy has multiple policyholders, and does not need to be provided for later accelerated death benefit claims by the same policyholder.(e) No later than 30 days after every payment of an accelerated death benefit for long-term care, the insurer shall provide the policyholder or certificate holder with a report that includes all of the following:(1) The accelerated death benefits paid out during the prior month.(2) An explanation of changes to the remaining death benefit, cash value or accumulation account, policy loan value, outstanding policy loan amount, no-lapse guarantee, policy lien, and premium payments or cost of insurance charges.(3) The amount of the remaining benefits that can be accelerated.(f) If a policyholder or certificate holder initiates a request to take a loan or withdrawal from the cash value of a life insurance policy that accelerates benefits for long-term care, the insurer shall provide the policyholder or certificate holder with the information described in paragraphs (1) to (7), inclusive, of this subdivision. The request shall be deemed incomplete, and the insurer shall not approve the loan or withdrawal, until the information has been provided and the policyholder or certificate holder submits a response that finalizes the request for the loan or withdrawal. The insurer shall send the policyholder or certificate holder a dated statement that includes all of the following:(1) An explanation of changes to the policy that would occur as a result of the loan or withdrawal.(2) A numerical demonstration of the effect of the payment on the remaining death benefit, cash value or accumulation amount, policy loan value, outstanding policy loan amount, no-lapse guarantee, policy lien, premium payments or cost of insurance charges, and daily, monthly, or lifetime long-term care benefits.(3) If a policyholder or certificate holder is initiating a request for a loan, a notice stating: “WARNING: Loans may reduce and potentially eliminate your death benefit and your long-term care benefits. Receipt of a loan may adversely affect your eligibility for Medicaid or other government entitlements, and loan proceeds may be taxable at your death if the loan is not repaid. Please consult a financial advisor.”(4) If a policyholder or certificate holder is initiating a request for a withdrawal, a notice stating: “WARNING: Cash withdrawals may reduce and potentially eliminate your death benefit and your long-term care benefits. Receipt of a cash withdrawal may be taxable and may also adversely affect your eligibility for Medicaid or other government benefits or entitlements. Please consult a financial advisor.”(5) A description of circumstances in which a loan or withdrawal may result in or contribute to the lapse of the policy.(6) If applicable, a hypothetical demonstration of how loan repayment may be deducted from a future payment of an accelerated death benefit for long-term care.(7) If applicable, a notice explaining the rate at which the loan will accrue interest and stating the projected outstanding loan amount after five years, assuming that the interest rate does not change, no loan repayments are made, and no additional loans are taken.(g) The statements and notices required by this section shall be in at least 12-point type.(Amended by Stats. 2020, Ch. 184, Sec. 43. (SB 1255) Effective January 1, 2021.)