Illinois Statues and Regulations Pertinent to Life Insurance Only
What terms may life insurance or annuity ads not use?
Investment, investment plan, founder's plan, charter plan, profits, profit sharing, savings, savings plan, or other similar terms that might mislead purchasers into believing they would receive something other than a policy or benefit not available to others of the same class and age group. If words or phrases such as non-medical or no medical exam required are used where policy issue is not guaranteed, the advertisement must contain an explanation that issuance of the policy may depend on the answers to health questions.
What is included in the policy summary?
**-Name and address of the insurance company and the producer -generic name of the policy -annual premium for the policy and each optional rider for the first five policy years plus other years, including a year between the insureds age 60 and 65 and/or (if earlier) the policies maturity date -Projected dividends through at least the 20th year (based on current dividend scale), with an accompanying statement saying that dividends are not guaranteed; and -date of the Policy Summary's preparation MUST be printed in separate document, for example it cannot be included on the same document as the buyers guide
What must life insurance illustrations include?
-Name of the insurer -Name and address of the insurance provider -Name, age, and gender of proposed insured -Rating classification -Initial death benefit
Life insurance illustrations may NOT:
-represent a policy as being anything other than life insurance -describe non guaranteed elements in a confusing manner -provide incomplete information to the applicant
What is a terminable illness defined as?
A medical condition that, in a licensed physicians opinion, would result in the insureds death within 24 months or any condition that requires continuous confinement in an eligible institution if the insured is expected to remain until death.
What is a viatical settlement?
A written agreement between viatical settlement provider (a person, partnership, corporation, or other entity) and a person (viator) who owns or is insured by a life insurance policy and who has a catastrophic or life threatening illness or condition. The agreement sets the terms under which the provider will compensate the policy owner, in an amount less than the expected death benefit, in exchange for the policyowner's assignment, sale, or other transfer of the policys death benefit or ownership to the provider.
What can't Accelerated benefits be marketed as?
Long-term care insurance
Failure to provide a Buyers Guide or Policy Summary to prospective buyers can lead to:
An omission that misrepresents the benefits, advantages, and conditions or terms of the life insurance policy
What do replacement regulations ensure?
Assure that the policy owner receives info with which a decision can be made in his own best interest; and reducing the opportunity for misrepresentation and incomplete disclosures.
When must the Buyers Guide be presented to the applicant?
Before accepting the applicants initial premium or premium deposit (in the case of direct response insurers, they must be delivered with or before the delivery of the policy). Insurers can use the NAIC Buyers Guide as a substitute for the Buyers Guide created by the Division of Insurance
**What is free look?
During a period of 10 DAYS after the policy has been delivered to the owner, it may be surrendered to the insurer and a refund of all premiums shall be made. In the event of a policy replacement, the owner shall be provided with a Notice Regarding Replacement together with a 20 DAY free look regarding the new policy.
What provisions must a life insurance policy have? Excluding industrial, group or annuities.
Grace period, settlement, free look
Disclosure Requirements
Illinois life insurance disclosure laws require ALL insurers to provide specific information to every applicant purchasing life insurance. The purpose of the requirement is to improve applicants ability to select the most appropriate policies to meet their needs
Viatical Settlement Act
Provides regulation for viatical contracts issued by providers, brokers, and life insurance agents soliciting these contracts. Under this act, viatical settlement brokers are required to attend a one-time initial training course with ongoing continuing education of at least four hours over a 24 month period.
When recommending purchase of exchange of a life insurance policy, variable life insurance contract, or an annuity what must the agent or insurer make an effort to do?
The agent or insurer must make a reasonable effort to determine the consumers: -financial status -tax status -investment objectives -such other information that should be considered when making recommendations to the consumer However, the agent is excused from this requirement if the consumer: -refuses to give relevant information requested by the agent or insurer -decides to enter into an insurance transaction that is not based on a recommendation of the agent or insurer or -does not give complete or accurate information to the agent or insurer
What is the life solicitation regulation?
The life insurance solicitation regulation specifically required that insurers deliver information to buyers that will help them select life insurance plans that are most appropriate for their needs and that will assist them in evaluating the relative costs of similar polices.
What two documents must be delivered to an applicant when applying for life insurance?
**A Buyers Guide and a Policy Summary
Producer annuity training
**1) An insurance producer who engages in the sale of annuity products shall complete a one time, four hour credit training course approved by the department prior to such activities. Completing substantially equivalent training in any other state shall satisfy this requirement. This training may be approved as a portion of the producers biennial continuing education requirement 2)Insurers are required to obtain and maintain records verifying producer compliance with this training requirement
Insurers duty in replacement cases:
**Insurers must require their producers to comply with the replacement regulation and furnish applicants with a copy of the Buyer's Guide -Within three working days of receiving a replacement application, the replacing insurer must forward to the existing insurer the Notice Regarding Proposed Replacement of Life Insurance or Annuity. -The replacing insurer must also delay issuing its policy for at least 20 DAYS. -The replacing insurer must deliver to the insured a statement that he has the right to an unconditional refund of all premiums paid within 20 DAYS from the date of delivery -Each replacing insurer must maintain a file of replacement notices for at lease THREE YEARS
What is the Buyers Guide??
**This is a document that generally describes life insurance from a buyers perspective. The Code defines the format these guides must follow. Insurers can use the NAIC Buyers Guide as a substitute for the Buyers Guide created by the Division of Insurance. **Required
What would be considered a qualified condition for accelerated benefits?
Includes heart attack, stroke, coronary artery surgery, life threatening cancer, kidney failure, Alzheimers disease, paraplegia, and major organ transplant that requires the insured to be confined to a skilled nursing facility with no expectation of recovery.
When must the Policy Summary be delivered to the applicant?
Must be delivered with or before delivery of the policy (whether by a producer or a direct response insurer)
What must the producer obtain from the applicant for every life insurance application?
Must obtain a signed statement from the applicant indicating whether or not replacement is involved. In addition, the producer must also sign a similar statement revealing whether or not he knows replacement is involved in the transaction.
What is replacement of life insurance?
Replacement of life insurance is any transaction whereby new life insurance is to be purchased and, as a part of that transaction, existing life insurance it to be: -lapsed or surrendered -converted into paid-up insurance or continued as extended term insurance -amended or reduced in face amount -reissued with any reduction in cash value or -pledged as collateral for a loan or subjected to borrowing more than 25% of the policies existing cash value
What is the purpose of replacement regulation?
Replacement regulation is to regulate the activities of insurers and insurance producers with respect to the replacement of existing life insurance or annuities and to protect the interests of life insurance and annuity policy owners by establishing minimum standards of conduct to be observed in the replacement or proposed replacement of existing life insurance
Insurance products and insurance companies that market life insurance products must help the consumer understand:
The proposed life insurance policy by using numerical illustrations. These illustrations are to describe the policy by numerically outlining the projected performance of the policy at the time of the sale or upon purchase.
What happens if the accelerated benefit is less than the full face amount?
The remaining (unpaid) face amount must be paid on the insureds death. (it is non forfeitable)
Suitability in the sale of life insurance
The state regulates the conduct of agents who recommend the purchase or exchange of a life insurance policy, variable life insurance contract, or an annuity to a consumer. The purpose of this regulation is to set standards and procedures for such recommendations by insurers or agents so that the insurance needs and financial objectives of the consumer are properly addressed.
What is the policy summary?
This is a written statement describing the basic elements of the policy under consideration.
What is grace period?
This is one of the necessary provisions in IL for a life policy. The ensured is entitled to a grace period of 30 days or one month during which a premium may be paid subject to the right of the company to charge interest at the rate of 6% per year.
What is settlement?
This is one of the necessary provisions in IL for a life policy. When a policy becomes a claim on the death of the insured, settlement shall be made within two months after receipt by the insurer of proof of death. INTEREST SHALL ACCRUE AT A RATE OF 10% PER YEAR ON ANY AMOUNTS RETAINED BY THE INSURER BEYOND 31 DAYS BEFORE PAYMENT OF THE TOTAL AMOUNT DUE OR THE FIRST INSTALLMENT PAYABLE IF THE BENEFICIARY HAS REQUESTED INSTALLMENT PAYMENTS.
Is a license required to act as a settlement provider?
Yes, No one may act as a settlement provider without a license to do so. An applicant must submit an application and fee to the Director of insurance. Licenses can be renewed each year by application and payment of a renewal fee. A license will expire unless it is renewed.
Does disclosure law require that individuals identify themselves?
Yes, and they have to explain that they are soliciting life insurance on behalf of an insurance company (giving the full name of the company they represent). Terms such as financial planner, investment adviser, financial consultant, and so forth may not be used to imply that the producer is generally engaged in an advisory business in which compensation is unrelated to sales, unless that is true.
Accelerated Benefits
**Allows for early payment of a portion (or all in some cases) of a life insurance policies face amount. To qualify for early payment the insured must either suffer from a terminal medical condition or have qualified covered condition that requires skilled nursing care.
When replacement is involved the producer must:
**present to the applicant a copy of the Important Notice Regarding Replacement of Life Insurance and have it signed by the applicant -provide the applicant with copies of any sales proposals used and -submit to the replacing insurer a signed copy of the Important Notice Regarding Replacement of Life Insurance and all copies of all sales proposals used.
What are the responsibilities of the agent?
An agent must inform the prospective purchaser, before beginning a life insurance sales presentation, that he is acting as a life insurance agent and inform the prospective purchaser of the full name of the insurance company that he is representing to the buyer. In sales situations in which an agent is not involved, the insurer must identify its full name.