13. Alabama insurance law pertinent to Life insurance

Advertisements must clearly identify the name of the insurance company.

If individual policies are used in advertising, the form number or appropriate policy description must also be included.

Alabama insurance law pertinent to life insurance only

This section will explain some of the major regulations that apply exclusively to life insurance in this state. By the end of this section, you should be able to explain the basic laws that apply to different types of life insurance products.

Table to show installment payment of policy.

Table to show installment payment of policy.

Testimonials

Testimonials used in advertisements must be genuine and applicable to the policy, and must represent the author's current opinion. If an individual making a testimonial has a financial interest in the insurer, the insurer must prominently disclose that fact.

Preneed Funeral Contracts

A preened funeral contract or prearrangement is an arrangement by or for an individual before the individual's death purchased for the purpose of obtaining specific funeral or cemetery merchandise or services. If a preneed funeral contract is funded by a life insurance policy or an annuity contract, it must disclose the following: The fact that the policy or contract is used to fund a prearrangement The nature of the relationship among parties of the contract: the soliciting agent, the provider of services, the administrator and any other person.

General Rules and Prohibited Practices

An illustration used in the sale of a life insurance policy must be clearly labeled "life insurance illustration" and contain the following basic information: Name of insurer Name and business address of producer or insurer's authorized representative, if any Name, age and sex of proposed insured, except when a composite illustration is permitted under this regulation Underwriting or rating classification upon which the illustration is based Generic name of policy, the company product name (if different), and form number Initial death benefit Dividend option election or application of non-guaranteed elements, if applicable

Policies to Be Illustrated

Each insurer marketing policies that are subject to the regulation must notify the Commissioner whether a policy form is to be marketed with or without an illustration. If the insurer identifies a policy form as one to be marketed without an illustration, the use of an illustration for any policy using that form before the first policy anniversary is prohibited.

Annual Report and Notice to Policyowners

For a policy the insurer has designated as one for which illustrations will be used, the insurer must provide each policyowner with an annual report on the status of the policy. The report must contain certain information specified in the regulation, such as the current cash surrender value and current death benefit. If the annual report does not include an in force illustration, it must contain the following prominent notice:

Insurers or their officers, producers or employees who violate any of the state provisions on advertisements will be subject to a fine up to $1,000 per violation and suspension or revocation of the certificate of authority or license.

Insurers or their officers, producers or employees who violate any of the state provisions on advertisements will be subject to a fine up to $1,000 per violation and suspension or revocation of the certificate of authority or license.

Payment of premium, increases

all premiums except for the first one should be paid in advance either at the home office of the company or to a company agent. A policy premium may not be increased unless the policy contains a provision notified the consumer of possible premium increases.

Entire Contract

each policy must constitute the entire contract between the parties. All statements on the application are considered representations and not warranties. When a summary of the application is attached to the policy, the insurer is required to keep and maintain the original application for at least 3 years from the date of policy issue.

Duties of Existing Insurer

existing insurers in this state must keep the records of all replacement notifications for at least 5 years or until the next Commissioner's examination - whichever is later. They also must send a letter to the policyowner informing them of the right to receive information about the existing policy values. The information must be provided within 5 business days after a request from the policyowner.

Replacing Insurer

is the company that issues the new policy

B. Life Insurance Solicitations, Disclosures, Illustrations 1. Advertisements

Advertisement means any material designed to persuade the public to purchase life insurance, including the following: Printed and published material, audiovisual material and descriptive literature used in mail, newspapers, magazines, radio and television, billboards and others Descriptive literature and sales aids of all kinds used by an insurer, agent, or broker for presentation to member s of the public including leaflets, booklets, and form letters Prepared sales talks, presentation and material for use by insurance agents.

The disclosure document must contain, at a minimum, the following information:

Generic name and description of the contract; Insurer's name and address Specific dollar amounts or percentage charges and fees, and an explanation of how they would apply Information about the current guaranteed rate for new contracts with a clear notice that the rate may be subject to change. An insurer or producer who violates annuity disclosure provisions will be considered in violation of the Unfair Trade Practices Law.

It is illegal to advertise or circulate any materials that are untrue, deceptive, or misleading. Specifically, false or deceptive advertising includes:

Misrepresenting the terms, benefits, conditions, or advantages of any insurance policy Misrepresenting any dividends to be received from the policy, or previously paid out Misrepresenting the financial condition of any person or the insurance company Using names or titles that have tendency to misrepresent the true nature of a policy Misrepresenting the true purpose of an assignment or loan against a policy Misrepresenting an insurance policy as a share of stock.

C. Life and Annuity Replacement

Replacement means any transaction in which new life insurance or a new annuity is purchased and, as a result, the existing life insurance or annuity has been or will be any of the following: Lapsed, forfeited, surrendered, or otherwise terminated Reissued with any reduction in cash value Converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or other policy values Amended so as to affect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid Used in a financed purchase.

F. Alabama Life and Disability Insurance Guaranty Association

The Alabama Life and Disability Insurance Guaranty Association was created to protect policyowners, insureds, beneficiaries, annuitants, payees and assignees of life policies, disability policies, annuity contracts and supplemental contracts against failure in performance of contractual obligations due to the impairment or insolvency of the insurance company issuing the policies or contracts. An association of insurers was created to enable the guarantee of payment of benefits and continuation coverages. Members are subject to assessment to provide the funds needed to carry out the association's purpose. The association has authority to assist the Commissioner in detecting and preventing insurer impairments and insolvencies.

Potential enrollees of non-term group life subject to this regulation must be furnished a quotation with the enrollment materials.

The quotation must show potential policy values for sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. This quotation is not to be considered an illustration for purposes of this regulation, but all information provided must be consistent with the illustrated scale. A basic illustration must be provided at delivery of the certificate to enrollees for the non-term group life who enroll for more than the minimum premium necessary to provide pure death benefit protection. In addition, the insurer must make a basic illustration available to any non-term life enrollee who requests it.

Title

each policy must contain a title briefly describing the policy.

Basic Illustration

means a ledger or proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements.

In force illustration

means an illustration furnished after the policy it depicts has been in force for 1 year or more.

Grace Period

a grace period of 1 month (no more than 30 days) should be allowed for the payment of every premium after the first. During the grace period, the insurance will continue in force, and if the insured dies, the overdue premium will be deducted from any of the policy's settlements.

Every insurer in this state must establish and maintain a system of control over the content, form and method of dissemination of all advertisements of its policies.

All advertisements are the responsibility of the insurer.

A. Policies and Provisions 1. Policy Approval

All insurance forms, including life insurance policies and annuity contracts, must be filed with and approved by the Commissioner. The forms must be filed at least 30 days in advance of the form delivery. The Commissioner then has 30 days to approve or disapprove the form. If not action is taken by the Commissioner, at the end of the 30-day period, the form is deemed approved.

Definitions

For the purpose of this regulation, illustration means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years. There are 3 types of illustrations:

E. Minors and Insurance

In the state of Alabama, minors are allowed to buy insurance policies or annuity contracts at the age of 15. The policy will be made payable either to the minor or the minor's estate, or to a person who has an insurable interest in the life of the minor. Once the minor reaches the age of 18, the minor is considered competent to receive payments or settlements elected under the life policy or annuity contract, in the amount not exceeding $3,000 in any one year.

IMPORTANT POLICY OWNER NOTICE

You should consider requesting more detailed information about your policy to understand how it may perform in the future. You should not consider replacement of your policy or make changes in your coverage without requesting a current illustration. You may annually request, without charge, such an illustration by calling [insurer's phone number], writing to [insurer's name] at [insurer's address] or contracting your agent. If you do not receive a current illustration of your policy within 30 days from your request, you should contact your state insurance department."

Incontestability

a policy must be incontestable after it has been in force for at least 2 years. Nonpayment of premium, however, will allow the insurer to contest the policy.

1. Duties of Insurers with Respect to Direct Response Sales

Direct-response insurers, those who solicit through mail, telephone, Internet or other media of mass communication, must inform their responsible personnel of the requirements of this regulation. They must also require with, or as part of each completed application for life insurance a statement signed by the applicant as to whether or not such insurance will replace existing life insurance. Where no replacement is proposed by an insurer in the solicitation of a direct-response sale and a replacement is involved, the insurer must include a Notice Regarding Replacement of Life Insurance in the prescribed format when the policy is mailed to the applicant. When an insurer proposes a replacement in the solicitation of a direct-response sale and a replacement is involved, the insurer must request from the applicant with or as part of the application a list of all existing life insurance to be replaced.

When an insurer is impaired or insolvent, the Association may do any of the following:

Guarantee or reinsure any or all of the covered policies Provide money, pledges, notes, or guarantees proper to assure payment of obligations Loan money to the impaired or insolvent insurer.

If a policy form is identified as one to be marketed with an illustration, a basic illustration must be prepared and delivered in accordance with this regulation.

However, a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals. The illustration furnished to an applicant for a group life insurance policy or policies issued to a single applicant on multiple lives may be either an individual or composite illustration representative of the coverage on the lives of members of the group or the multiple lives covered.

Delivery and Retention Requirements

If a producer uses a basic illustration in the sale of a life insurance policy and the policy is applied for as illustrated, a signed copy of that illustration must be submitted to the insurer at the time of policy application. A copy must also be provided to the applicant.

The following disclosure standards apply to annuity contracts issued in this state:

If the annuity application is taken in a face-to-face meeting, the applicant must be provided with the disclosure document and the Buyer's Guide at or before the time of application. If the annuity application is taken any other way, the applicant must be sent the disclosure document and the Buyer's Guide no later than 5 business days after the completed application is received by the insurer. If these two documents are not provided at or before the time of application, the insurer must give the applicant a free-look period of at least 15 days to return the policy without penalty. This free-look period may run concurrently with any other free-look period provided under state regulations.

Penalties

In addition to any other penalties provided by Alabama law, an insurer or producer who violates this regulation is guilty of twisting.

3. Disclosures

In addition to solicitation rules, life insurance policies must comply with specific disclosure requirements outlined below: The information required to be disclosed cannot be minimized, or presented in an obscure or ambiguous fashion The type of policy advertised or solicited must be prominently described to the consumer Direct response policies cannot state or imply that because there is no insurance producer or commission involved, there will be a cost saving to prospective purchaser (unless that is true) Life insurance policies that contain graded or modified benefits must prominently display any limitation of benefits. All premium decreases and increases must be disclosed Any nonforfeiture values shown in an advertisement must be displayed either for the entire amount of the basic life policy death benefit or for each $1,000 of initial death benefit.

Upon the request of the policyowner, the insurer must furnish an in force illustration of current and future benefits and values based on the insurer's present illustrated scale.

No signature or other acknowledgment of receipt of this illustration is required. If an insurer has made an adverse change in non-guaranteed elements that could affect the policy since the last annual report, the annual report must contain a prominent notice of that fact and the nature of the change.

Duties of the replacing producer

Present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer. A copy must be left with the applicant. Obtain a list of all existing life insurance and/or annuity policies to be replaced including policy numbers and the names of all companies being replaced. Leave the applicant with the original or a copy of written or printed communications used for presentation to the applicant. Submit to the replacing insurance company a copy of the replacement notice with the application.

When using an illustration in the sale of a life insurance policy, an insurer or its producers may not do any of the following:

Represent the policy as anything other than a life insurance policy Use or describe non-guaranteed elements in a manner that could be misleading State or imply that the payment or amount of non-guaranteed elements is guaranteed Use an illustration that does not comply with the requirements of this regulation Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated Provide an applicant with an incomplete illustration Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless that is the fact Use the term "vanish" or "vanishing premium," or a similar term that implies the policy becomes paid up , to describe a plan for using nonguaranteed elements to pay a portion of future premiums Except for policies that can never develop nonforfeiture values, use an illustration that is "lapse-supported," Use an illustration that is not self-supporting

Duties of the replacing insurance company

Require from the producer a list of the applicant's life insurance or annuity contracts to be replaced and a copy of the replacement notice provided to the applicant Send each existing insurance company a written communication advising of the proposed replacement within a specified period of time of the date that the application is received in the replacing insurance company's home or regional office. A policy summary or ledger statement containing policy data on the proposed life insurance or annuity must be included.

Standards for Basic Illustrations

The format of a basic illustration must comply with the requirements set out in the regulation. Some of these requirements are as follows: The illustration must be labeled with the date on which it was prepared Each page, including any explanatory notes or pages, must be numbered and show its relationship to the total number of pages in the illustration (for example, the fourth page of a 7-page illustration must be labeled page 4 of 7 pages) The assumed dates of payment receipt and benefit payout with in a policy year must be clearly identified Guaranteed death benefits and values available upon surrender, if any, for the illustrated premium outlay or contract premium must be shown and clearly labeled guaranteed The guaranteed elements, if any, must be shown before corresponding nonguaranteed elements and must be specifically referred to on any page of an illustration that shows or describes only the nonguaranteed elements If the illustration shows that the premium payer may allow policy charges to be paid using nonguaranteed values, the illustration must clearly disclose that a charge continues to be required and that, depending on actual results, the premium payer may need to continue or resume premium outlays.

2. Solicitations

The purpose of the life insurance solicitation regulations is to protect consumers from unfair solicitations and to keep the consumers well informed. The law spells out required and prohibited actions for companies and producers in order to provide adequate information to consumers regarding life insurance products and their relative costs. The solicitation rule requires that the buyer's guide and the policy summary be provided to the customer during the application process. This rule applies to individual policies that do not offer credit insurance, variable products or annuities. A life insurance company must keep a copy of every buyer's guide and policy summary for 3 years after the date of its last authorized use.

4 illustrations Purpose

The purpose of the regulation is to provide rules for life insurance policy illustrations that will protect consumers and promote consumer education. The regulation provides illustration formats, prescribes standards to be followed when illustrations are used, and specifies the disclosures that are required in connection with illustrations. The goals of this regulation are to ensure that illustrations do not mislead purchasers of life insurance and to make illustrations more understandable. To the extent possible, insurers must eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed.

This regulation applies to all group and individual life insurance policies except:

Variable life Individual and group annuity contracts Credit life insurance Life insurance policies with no illustrated death benefits on an individual that exceed $10,000.

Policies Sold to Students

When life insurance policies are solicited to students, the following disclosure requirements apply: The address may not include any combination of words that would imply that the correspondence is from an educational institution or is endorsed by it (unless that is true) All advertisements, including informational flyers, must be clearly identified as coming from an insurer The return address on the enveloped may not imply that the soliciting insurer is affiliated with an educational institution.

If the policy is issued

a basic illustration conforming to the policy as issued must be sent with the policy and signed no later than the time the policy is delivered. A copy must be provided to the insurer and the policy owner.

The supplemental illustration must include

a notice referring to the basic illustration for guaranteed elements and other important information.

Reinstatement

a policy may be reinstated within 3 years after the date of premium default as long as the policy has not been surrendered for cash value, and the insured submits a written application, proof of insurability and payment of overdue premiums and interest.

If the policy is issued other than as applied for

a revised basic illustration conforming to the policy as issued must be sent with the policy. The revised illustration must conform to the requirements of this regulation, be labeled "Revised Illustration" and be signed and dated by the applicant or policy owner and producer no later than the time the policy is delivered. A copy must be provided to the insurer and the policy owner.

Participation in surplus/Dividends

if a policy is participating, an annual division of company's surplus must begin no later than the 3d policy year. The insured under any annual dividend policy has the right to have the dividend paid in cash or applied in reduction of premiums or to purchase paid-up additional insurance.

Misstatement of Age or Sex

if the age or sex of the insured was misstated during the time of premium calculation, any amount payable under the policy will be adjusted to what the premium would have purchased at the correct age or sex

If an interest rate used to determine the illustrated non-guaranteed elements is shown,

it may not be greater than the earned interest rate underlying the disciplined current scale.

If the insurer sends the basic illustration or revised illustration to the applicant or policy owner by mail,

it must include instructions for the applicant or policy owner to sign the duplicate copy of the numeric summary page of the illustration and return the signed copy to the insurer. The insurer's obligation is satisfied if it can demonstrate that it has made a diligent effort to secure a signed copy of the numeric summary page. The requirement to make a diligent effort is satisfied if the insurer includes in the mailing a self-addressed postage prepaid envelope with instructions for the return of the signed numeric summary page. The insurer must retain a signed copy of the basic illustration and a revised basic illustration, if any, along with any certification that either no illustration was used or that the policy was applied for other than as illustrated, until 3 years after the policy is no longer in force. A copy need not be retained if no policy is issued.

Supplemental Illustration

means an illustration furnished in addition to a basic illustration that meets the applicable requirements of this regulation, and that may be presented in a format differing from the basic illustration, but may only depict a scale of non-guaranteed elements that is permitted in a basic illustration.

If a producer doesn't use an illustration in the sale of a life insurance policy

or if the policy is applied for other than as illustrated, the producer must certify that fact in writing on a form provided by the insurer. On the same form the applicant must acknowledge that no illustration conforming to the policy applied for was provided and must acknowledge an understanding that an illustration conforming to the policy as issued will be provided no later than at the time of policy delivery. This form must be submitted to the insurer at the time of policy application.

Maximum rate of interest on policy loans

policy loan interest rates provision may allow an adjustable maximum interest rate established from time to time by the insurer. The interest rate charged on a policy loan cannot exceed the greater of the published monthly average rate or the rate used to compute the cash surrender value under the policy.

Settlement of Claims

settlement of death benefit must be made upon receipt of proof of death. Insurer cannot specify a period for payment of claims longer than 2 months from the receipt of proof of death.

A basic illustration must include a narrative summary that includes the following:

A brief description of the policy being illustrated, including a statement that it is a life insurance policy A brief description of the premium outlay or contract premium, as applicable, for the policy. For a policy that does not require payment of a specific contract premium, the illustration must show the premium outlay that must be paid to guarantee coverage for the term of the contract, subject to maximum premiums allowable to qualify as a life insurance policy under the applicable provisions of the Internal Revenue Code A brief description of any policy features, riders or options, guaranteed or nonguaranteed, shown in the basic illustration and the impact they may have on the benefits and values of the policy Identification and a brief definition of column headings and key terms used in the illustration A statement containing in substance the following: "This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those shown." Following the narrative summary, a basic illustration must include a numeric summary of the death benefits and values and the premium outlay and contract premium, the guaranteed death benefits and values must be based on the contract premium. This summary must be shown for various policy years specified in the regulation.

Each producer who initiates the application must submit the following to the insurance company with or as part of each application:

A statement signed by the applicant as to whether replacement of existing life insurance or annuity is involved in the transaction A signed statement as to whether the producer knows replacement is or may be involved in the transaction.

Standards for Supplemental Illustrations

A supplemental illustration may be provided if it complies with the following requirements: It is appended to, accompanied by or preceded by a basic illustration that complies with this regulation The nonguaranteed elements shown are not more favorable to the policy owner than the corresponding elements based on the scale used in the basic illustration It contains the same statement required of a basic illustration that nonguaranteed elements are not guaranteed For a policy that has a contract premium, the contract premium underlying the supplemental illustration is equal to the contract premium shown in the basic illustration For policies that do not require a contract premium, the premium outlay underlying the supplemental illustration must be equal to the premium outlay shown in the basic illustration

D. Annuity Suitability and Disclosures

An insurance producer may not recommend the purchase, sale, or exchange of an insurance policy or annuity contract without the reasonable belief that the transaction is in the best interest of the insured. The purpose of the annuity disclosure regulation is to establish standards for the disclosure of certain minimum information about the annuity contracts in order to protect and educate consumers. The regulation applies to all individual and group annuities except variable annuities, immediate and deferred annuities without nonguaranteed elements, and annuities used to fund employee pension plans under ERISA, 401(k) or 403(b) plans, or government plans.

The form and content of life insurance and annuity advertisements in general must follow these requirements:

Be truthful and not misleading Not use the terms "investment," "investment plan," "savings," or any other similar terms, which could be misleading to a purchaser Not use as the name or title of a life insurance policy any phrase which does not include the words "life insurance" unless accompanied by other language clearly indicating that is it life insurance Prominently describe the type of policy advertised, such as group, term, or whole life.

Advertisements do not include the following:

Communications used within an insurer's own organization that are not intended for the public Communications with policyholders that do not pertain to purchase, increase, modification or reinstatement of policies General announcements from a group or blanket policyholder to eligible individuals about a policy.

3. Violations and Penalties

Any insurer, agent, representative, officer or employee of an insurer failing to comply with the requirements of this regulation will be subject to penalties appropriate under the Alabama Insurance Code. This does not prohibit the use of additional material other than that which is required that is not in violation of this regulation or any other statute or regulation. Policyowners have the right to replace existing life insurance after indicating in the application for life insurance that this is not their intention. Patterns of action by policyowners who purchase the replacing policies from the same agent are prima facie ("at first sight") evidence of the agent's knowledge that replacement was intended in connection with the sale of those policies, and the patterns of action are prima facie evidence of the agent's intent to violate this regulation. Violations of the replacement regulation may be subject to revocation and suspension of license, monetary fines and the forfeiture of commissions paid to a producer as a result of the replacement. If the Commissioner determines that the violations were material to the sale, the insurer may be required to make restitution, restore policy values and pay interest at 6% on the amount refunded in cash.

An illustration must also include

tabular detail setting forth certain data relating to premiums, guaranteed death benefits and guaranteed surrender values. The tabular detail must be provided for at least each of the first 10 policy years and for certain policy years thereafter, as specified in the regulation.

The Association

The Association may enter into contracts necessary to carry out provisions, sue or be sued, borrow money, employ people to handle financial transactions, negotiate and contract with a liquidator to carry out powers and duties, take legal action when necessary to avoid payment of improper claims, and exercise the powers of a domestic life or disability insurer. Members of the Association will be assessed in proportion with the net direct written premiums that each member bears to all of the member insurers. These assessments are due no less than 30 days after prior written notice to the member insurers and they accrue interest at 6% per year on and after the due date.

Statements

substantially similar to the following must be included on the same page as the numeric summary and be signed by the applicant, or by the policy owner if the illustration is provided at time of delivery: A statement to be signed and dated by the applicant or policy owner reading as follows: "I have received a copy of this illustration and understand that any nonguaranteed elements illustrated are subject to change and could be either higher or lower. The agent has told me they are not guaranteed." A statement to be signed and dated by the insurance producer or other authorized representative of the insurer reading as follows: "I certify that this illustration has been presented to the applicant and that I have explained that any nonguaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration."

Existing Insurer

is the company whose policy is being replaced.

The contractual obligations of the insolvent insurer

may be no greater than the obligations the insurer would have had in the absence of insolvency. The total liability of the Association may not exceed $100,000 in cash values or $300,000 for all benefits for any 1 life.

Table showing loan values and options

such table must be available under the policies each year upon default in premium payments for at least the first 20 policy years.

2. Application and Scope

The life insurance and annuity replacement regulation does not apply to transactions involving any of the following: Credit life insurance Group life insurance or group annuities where there is no direct solicitation of individuals by an insurance agent. Group life insurance and annuities used to fund prearranged funeral contracts An application to the existing insurer that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised when the existing policy or contract is being replaced by the same insurer pursuant to a program filed with and approved by the Commissioner Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same company Policies or contracts used to fund: An employee pension or welfare benefit plan that is covered by the Employee Retirement and Income Security Act (ERISA) A plan described by Sections 401(a), 401(k) or 403(b) of the Internal Revenue Code, where the plan, for purposes of ERISA, is established or maintained by an employer A governmental or church plan defined in Section 414, a governmental or church welfare benefit plan, or a deferred compensation plan of a state or local government or tax exempt organization under Section 457 of the Internal Revenue Code A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor Where new coverage is provided under a life insurance policy or contract and the cost is borne wholly by the insured's employer or by an association of which the insured is a member Existing life insurance that is a non-convertible term life insurance policy that will expire in 5 years or less and cannot be renewed Immediate annuities that are purchased with proceeds from an existing contract. Immediate annuities purchased with proceeds from an existing policy are not exempted from the requirements of this rule Structured settlements.

Policy loans

policies with cash value must provide for policy loans. The company must advance to the insured a sum equal to or less than the policy's cash value at a specified rate of interest (not exceeding 8% per annum). If the amount of the loan exceeds the policy cash surrender value, the insurer must provide a 30-day notice to the policyholder.