2023 Vermont Statutes › Title 8 - Banking and Insurance › Chapter 103 - Life Insurance Policies and Annuity Contracts › § 3841. Disclosure to policy owner

§ 3841. Disclosure to policy owner
(a) With each application for a life settlement, a life settlement provider or a life settlement broker shall provide the policy owner with at least the following disclosures not less than 10 days prior to the time the application for the life settlement contract is signed by all parties. The disclosures shall be provided in a separate document that is signed by the policy owner and the life settlement provider or life settlement broker and shall include the following information:
(1) There are possible alternatives to life settlement contracts, including any accelerated death benefits or policy loans offered under the policy owner’s life insurance policy.
(2) That a life settlement broker represents exclusively the policy owner and not the insurer or the life settlement provider and owes a fiduciary duty to the policy owner, including a duty to act according to the policy owner’s instructions and in the best interest of the policy owner.
(3) Some or all of the proceeds of the life settlement may be taxable under federal income tax and state franchise and income tax laws, and assistance should be sought from a professional tax advisor.
(4) Proceeds of the life settlement could be subject to the claims of creditors.
(5) Receipt of the proceeds of a life settlement may adversely affect the policy owner’s eligibility for Medicaid or other government benefits or entitlements, and advice should be obtained from the appropriate government agencies.
(6) The policy owner has the right to rescind a life settlement contract before 30 calendar days after the date upon which the life settlement contract is executed by all parties. Rescission, if exercised by the policy owner, is effective only if both notice of the rescission is given and the policy owner repays all proceeds and any premiums, loans, and loan interest paid on account of the life settlement within the rescission period. If the insured dies during the rescission period, the life settlement contract shall be deemed to have been rescinded, subject to repayment by the policy owner or the policy owner’s estate of all life settlement proceeds and any premiums, loans, and loan interest on the life settlement within 60 days of the insured’s death.
(7) Funds will be sent to the policy owner within three business days after the life settlement provider has received the insurer or group administrator’s written acknowledgment that ownership of the policy or interest in the certificate has been transferred and that the beneficiary has been designated.
(8) Entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate, to be forfeited by the policy owner. Assistance should be sought from an independent, qualified professional with experience in these matters.
(9) Disclosure to a policy owner shall include distribution of a brochure approved by the Commissioner describing the process of life settlements.
(10) The disclosure document shall contain the following language: “All medical, financial, or personal information solicited or obtained by a life settlement provider or life settlement broker about an insured, including the insured’s identity or the identity of family members, a spouse or party to a civil union or a significant other may be disclosed as necessary to effect the life settlement between the policy owner and the life settlement provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase who may not be obligated to protect and keep the information confidential. You may be asked to renew your permission to share information every two years.”
(11) Following execution of a life settlement contract, the insured may be contacted for the purpose of determining the insured’s health status and to confirm the insured’s residential or business street address and telephone number, or as otherwise provided in this subchapter. This contact shall be limited to once every three months if the insured has a life expectancy of six months or more, and no more than once every two months if the insured has a life expectancy of six months or less. All such contracts shall be made only by a life settlement provider licensed in the state in which the policy owner resided at the time of the life settlement or by the authorized representative of such duly licensed life settlement provider.
(12) No broker shall have a financial relationship or affiliation with a life settlement provider unless the broker fully discloses such relationship or affiliation, and the manner and amount of the broker’s compensation. A broker shall not participate in or form a financial arrangement or affiliation with a life settlement provider if such arrangement or affiliation conflicts with the broker’s fiduciary duty to the policy owner.
(b)(1) A life settlement provider shall provide the policy owner with at least the following disclosures no later than 10 days before the date the life settlement contract is signed by all parties. The disclosures shall be conspicuously displayed in the life settlement contract or in a separate document signed by the policy owner and provide the following information:
(A) unless previously disclosed under subsection (a) of this section, the affiliation, if any, between the life settlement provider and the issuer of the insurance policy to be subject to the life settlement contract;
(B) the name, business address, and telephone number of the life settlement provider;
(C) any affiliations or contractual arrangements between the life settlement provider and the life settlement purchaser.
(2) If an insurance policy subject to a life settlement contract has been issued as a joint policy or involves family riders or any coverage of a life other than the insured under the policy to be subject to a life settlement contract, the policy owner or owners shall be informed of the possible loss of coverage on the other lives under the policy and shall be advised to consult with his or her or their insurance producer or the insurer issuing the policy for advice on the proposed life settlement.
(3) The document shall state the dollar amount of the current death benefit payable to the life settlement provider under the policy or certificate. The life settlement provider shall also disclose the availability, if known, of any additional guaranteed insurance benefits, the dollar amount of any accidental death and dismemberment benefits under the policy or certificate, and the extent to which the policy owner’s interest in those benefits will be transferred as a result of the life settlement contract.
(4) The document shall state whether the funds will be escrowed with an independent third party or placed in trust during the transfer process. If an escrow account is used, the document shall provide the name, business address, and telephone number of the independent third party escrow agent. If a trust account is used, the document shall identify the state or federally chartered institution. The document shall state that the policy owner may inspect or receive copies of the relevant escrow or trust agreements or documents.
(c) A life settlement broker shall provide the policy owner with at least the following disclosures no later than 10 days before the date the life settlement contract is signed by all parties. The disclosures shall be conspicuously displayed in the life settlement contract or in a separate document signed by the policy owner and provide the following information:
(1) the name, business address, and telephone number of the life settlement broker;
(2) a full, complete, and accurate description of all offers, counteroffers, acceptances, and rejections relating to the proposed life settlement contract;
(3) a written disclosure of any affiliations or contractual arrangements between the life settlement broker and any person making an offer in connection with the proposed life settlement contracts;
(4) the amount and method of calculating the broker’s compensation, which term includes anything of value paid or given to a life settlement broker for the placement of a policy; and
(5) where any portion of the life settlement broker’s compensation, as defined in subdivision (4) of this subsection, is taken from a proposed life settlement offer, a disclosure of the total amount of the life settlement offer and the percentage of the life settlement offer constituted by the life settlement broker’s compensation.
(d) If the life settlement provider transfers ownership or changes the beneficiary of the insurance policy, the provider shall communicate in writing the change in ownership or beneficiary to the insured within 20 days after the change. (Added 2009, No. 53, § 1, eff. Jan. 1, 2010.)