California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 3 - Insurers › Article 12.9 - Life Settlements › Section 2548.8 - Retained Rights and Interests

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) if the provider enters into a life
				  settlement that allows the owner to retain an interest in the policy, the life
				  settlement contract shall provide for the payment of such benefits to an
				  irrevocable beneficiary or beneficiaries.
(b) If the owner and provider have agreed
				  that the owner shall retain an interest in the policy in accordance with
				  subdivision (a) of this section, the policy or certificate of ownership must be
				  endorsed by the insurer acknowledging the owner's interest in the policy with
				  the appropriate designation of an irrevocable beneficiary or beneficiaries
				  prior to the transfer of policy or certificate of ownership. The provider must
				  notify the owner when the policy has been so endorsed.
(c) If the owner and provider have agreed
				  that the owner shall retain an interest in the policy in accordance with
				  subdivision (a) of this section, the life settlement contract shall contain the
				  following provisions:
(1) a provision that
				  establishes the terms under which compensation or any thing of value will be
				  paid to the owner, which compensation or thing of value is less than the
				  expected death benefit of the insurance policy or certificate provided;
				  however, that the minimum value shall be greater than a cash surrender value or
				  accelerated death benefit available at the time of application for the life
				  settlement contract pursuant to subdivision (k) of section
				  10113.1 of
				  the Insurance Code;
(2) a provision
				  that the life settlement transaction will effect the transfer of the amount of
				  the death benefit to the provider only to the extent or portion of the amount
				  settled. Benefits in excess of the amount settled shall be paid by the
				  insurance company directly to the irrevocable beneficiary or beneficiaries
				  designated pursuant to section
				  2548.8, subdivision (b) of these
				  regulations;
(3) a provision that
				  states all premiums shall be paid by the provider;
(4) provisions stating that in the event that
				  the policy lapses before maturation, the provider shall:
(A) notify the owner that the policy will
				  lapse thirty (30) days before the policy lapses, and provide the owner the
				  opportunity to pay the entire premium to maintain the policy for the benefit of
				  only the owner or the owner's irrevocable beneficiary or
				  beneficiaries;
(B) pay to the
				  owner, if the owner forgoes the opportunity to maintain the premium payments to
				  receive the entire death benefit on the policy, an amount equivalent to the
				  death benefit that the owner's designated beneficiary would have received had
				  the policy reached maturation within 30 days after the policy
				  lapses;
(5) a provision
				  that states, in the event the provider sells the policy, that the subsequent
				  purchaser shall assume all of the rights and obligations of the provider with
				  respect to the retained beneficiary sale, including the obligations in section
				  2548.8, subdivisions (c)(3) and
				  (c)(4) herein.
(6) a provision that
				  states that any amount paid to the owner directly from the provider or
				  purchaser may be subject to taxation, and that assistance should be sought from
				  a professional tax adviser.