Chapter 15 Alabama State Insurance Law(code)

Prohibited Provisions

- An industrial life policy may not contain a provision: Allowing the insurer to deny liability on the ground that the insured previously obtained other insurance from the same insurer Giving the insurer the right to void the policy because the insured: Has had any disease or ailment, or because the insured has received institutional, hospital, medical, or surgical treatment or attention that was not of a serious nature or was not material to the risk Has been denied insurance, unless the insurer proves that it would have denied initial coverage had it known of the previous denial

Duties of Insurers Regarding Direct-Response Sales An insurer must:

- Inform its personnel of replacement regulations - Require a statement signed by the applicant as to whether such insurance will replace existing life insurance with each application for life insurance - When replacement is not proposed but is involved, include a Notice Regarding Replacement when the policy is mailed - When replacement is proposed and is involved, request a list of all existing life insurance policies and their issuing insurers' names, and mail a Notice Regarding Replacement to the applicant: - Within 3 days after receiving the application, if the applicant names existing insurers - At policy delivery, if the applicant does not name existing insurers

Each existing insurer must:

- Inform its personnel of replacement regulations. - Give the replacing insurer a copy of any Policy Summary for the existing life insurance within 3 working days after forwarding the Policy Summary to its producer or the policyowner. - Maintain a file of the replacing insurer's written notice and Policy Summary, and copies of Policy Summaries and sales proposals used in conservation. - This file must be kept for 3 years or until the examination report by its home state, whichever is later

A replacing insurer must: - Inform its producers of replacement regulations - Require that each producer meet his/her duties as a producer with regard to replacement - When replacement is involved

- Verify the accuracy of sales proposals used and, if inaccurate, get correct information to the applicant - Give the applicant a Policy Summary - Notify the existing life insurer of the insured's name and the policy or policies to be replaced within 3 working days after the application is received or the policy is issued, whichever is sooner - Delay the policy's issuance for 20 days after notifying the existing insurer, unless the policy provides a free look period of 20 days - Give the policyowner a Policy Summary before accepting the initial premium, unless the policy provides a free look period of 20 days - Keep copies of the Notice Regarding Replacement, written notice, Policy Summary, sales proposals used, and replacement register for 3 years or until the next examination report in the replacing insurer's home state, whichever is later

TEST TIP FREE LOOK PERIODS throughout this book are as follows:

30 Day - Replacement policies 30 Day - Senior products such as: LTC and Medicare Supplement policies 10 Day - For all other policies

The punishment for fraud or making false statements may include: A Fines, imprisonment and/or hard labor B Fines only C Imprisonment D Fines, imprisonment or both

A

Under Alabama law, you cannot pay any valuable consideration to a person if they are not licensed as a producer. If a producer violates this provision, they are subject to a fine of up to: A 3 times the commission paid B 3 times the premium paid C $1,000 D $10,000

A A producer may not receive any valuable payment from any person or company if not licensed or appointed. A Producer is subject to a fine of up to 3 times the commissions paid. Only an insurer would be subject to a fine of up to 3 times the premium paid

A minor domiciled in Alabama who is 18 years old is competent to receive payments of up to _________ in any one year from a life insurance company, provided the insurer has not been notified of a guardian. A $3,000 B $4,000 C $5,000 D $6,000

A An 18 year old is still considered a minor in Alabama and can receive no more than $3,000 in any one year prior to the age of majority, unless the insurer has been notified of a guardian.

An insurer may reserve the right to defer the payment of a cash surrender value for up to _________ months after demand is made and the policy is surrendered. A 6 months B 2 months C 1 month D 3 months

A An insurer may take up to 6 months to process the surrender or exchange of the cash value accumulation in a permanent life insurance policy.

The Alabama Life and Disability Insurance Guaranty Association provides protection for all of the following, except: A Pay the insurer's creditors when facing insolvency B Guarantees or reinsures the insurer's covered policies C Loans money to the insurer D Guarantees payment of benefits

A Protects insureds, beneficiaries, annuitants and assignees from insurer insolvency by providing a guarantee of policy benefits up to certain limits and loans money to the insurer, which is primarily used to reinsure the insurer's policies. It does NOT pay the insurer's creditors.

Which of the following IS required when an application for an annuity is taken? A If the application is taken over the phone, the applicant must be provided an Annuity Disclosure document no later than 5 days after completing the application B If the application is taken over the phone, the applicant must be provided an Annuity Disclosure document no later than 10 days after completing the application C In a face-to-face meeting you do have to give the applicant an Annuity Disclosure document within 10 days D In a face-to-face meeting you are not required to give the applicant an Annuity Disclosure document

A The Annuity Disclosure Statement MUST be provided at or before the time of application for a face-to-face meeting or within 5 days if completing the application in an other than face-to-face meeting. This includes an application taken over the phone.

Which of the following is needed to receive a producer's license after passing the state licensing exam? A The producer must submit a uniform application for licensure with the Commissioner B The producer must pay an appointment fee C The producer must apply for a temporary license for the first 6 months D The producer must be interviewed by the Commissioner

A Upon passing Alabama's State Exam, a producer Must ONLY submit an application for a state license with a fee attached. Your certificate of passing the exam is good for 1 year. Don't delay in getting your license.

TEST TIP 2 fines commonly confused on the state exam:

A fine of 3 times the Premiums paid—applies to an insurer accepting business from a person that is not properly appointed and/or not licensed in the state A fine of 3 times the Commissions paid—applies to producers that are paid commissions while not properly licensed

Grace Period

A grace period of 30days

Know the difference between insurer and producer penalties. - Insurer is fined up to 3 times the premiums paid for accepting business from a non-licensed producer - Producer is fined up to 3 times the commissions paid for violating this regulation

A licensee regularly placing insurance with an insurer without being appointed by the insurer may have his/her license suspended or revoked. If this happens, the license may not be reinstated for at least 1 year. An insurer appointing a producer must file a Notice of Appointment with the Commissioner and pay the appropriate fee within 15 days after executing the agency contract or accepting the producer's first insurance application, whichever happens first. The Commissioner must verify that the producer is eligible for appointment within 30 days after receiving the notice. If the Commissioner determines that the producer is not eligible, he/she must notify the insurer within 5 days after making that determination. An insurer renewing a producer's appointment must pay the required renewal fee. An insurer's termination of a producer's appointment is subject to the agency contract.

Free Look Period for Newly Replaced Policies

A new policy issued that replaces another policy must grant a 30-day FREE LOOK period.

Boycott, Coercion, or Intimidation

A person may not infringe on a purchasers freedom and commit any act of boycott, coercion, or intimidation resulting in unreasonable restraint of, or monopoly in, the insurance business.

Falsification of Financial Information

A person may not make any false statement about an insurer's financial condition with intent to deceive, nor may they make entry in an insurer's book, report, or statement with intent to deceive an examiner. Any person falsifying financial information may be fined $500-$5,000.

Defamation or Malicious Statements about Financial Condition

A person may not make any oral or written statement that is false concerning, maliciously critical of, or derogatory to an insurer's financial condition with intent to injure any person transacting insurance business.

Twisting

A person may not misleadingly compare policies in order to induce a policy's lapse, forfeit, surrender, exchange, or conversion.

Unfair Discrimination

A person may not unfairly discriminate between individuals of the same class and life expectancy in a life or disability policy's or an annuity's rates or benefits, or in a disability policy's terms or conditions.

Conversion Privileges

A policy may provide that the insured, upon submitting a written request and presenting evidence of insurability, may convert the policy to any life policy the insurer issues that requires less frequent premium payments.

Reinstatement

A policy must be permitted to be reinstated up to 3 years after a lapse due to premium default.

Reinstatement- industrial life

A policy must be reinstated within 3 years after premium default. An insurer receiving an insufficient reinstatement payment must, within 60 days, either refuse to reinstate the policy and refund the payment, or reinstate the policy and either collect or waive the difference

Illustration

A presentation or depiction including a life policy's nonguaranteed elements over a period of years.

Basic

A proposal used in the sale of a life insurance policy that shows both guaranteed and non-guaranteed elements

An insurer must give prospective non-term group life enrollees:

A quote, with the enrollment materials, of potential values for sample ages and policy years on a guaranteed and nonguaranteed basis A basic illustration, upon any enrollee's request

Required Provisions for Reversionary Annuities

A reversionary annuity must, in addition to the provisions required for all annuities, including those previously stated, contain the standard nonforfeiture provision required of individual deferred annuities, as stated below.

Currently Payable Scale

A scale of nonguaranteed elements in effect on the illustration's preparation date or becoming effective within 95 days.

Disciplined Current Scale

A scale of nonguaranteed elements limiting an insurer's illustration production because of actual recent historical experience.

All of the following are required to be considered for reinstatement:

A written application Provide evidence of insurability Payment (or reinstatement) of overdue premiums

Sales Proposal

A written sales aid of any kind, unless of a generally descriptive nature or a Policy Summary, used to compare existing and proposed life insurance

Penalties

An insurer, producer, representative, or insurer's employee who violates replacement regulation may be penalized as allowed under Alabama's insurance law.

Fiduciary Duties

All funds a producer receives are held in a fiduciary capacity (i.e. in trust); the licensee may not fail to account for and pay the funds to the person entitled to them.

In force

An illustration given after the policy has been in force for at least 1 year.

Delivery of Illustration/Record Retention

An illustration used to sell life insurance must be signed and submitted to the insurer with the application. The applicant must be given a copy. If a revised policy is issued, a revised basic illustration must be signed and dated by the applicant and producer by policy delivery. If an illustration is not used, or if a revised policy is issued, the producer and applicant must certify this fact in writing. An insurer must keep a copy of the basic illustration, any revised basic illustration, and any certification for 3 years after the policy is no longer in force

Supplemental

An illustration, given with and possibly having a different format than a basic illustration, that only depicts a scale of nonguaranteed elements permitted in a basic illustration.

Standard Nonforfeiture Law for Individual Deferred Annuities

An individual deferred annuity must contain the following provisions: If premium payments cease, the insurer must pay: The minimum nonforfeiture amount on the date benefit payments begin Cash surrender benefits of at least the present value of the part of the paid-up annuity benefit that would have been earned at the annuity's surrender If there is no cash surrender benefit, the insurer must pay the present value of the paid-up annuity benefit.

Policies to be Illustrated

An insurer marketing a life policy must notify the Commissioner whether a policy shall be marketed with an illustration. A policy to be marketed without an illustration may not use an illustration before the policy's first anniversary. A basic illustration must be provided with a policy to be marketed with an illustration.

Separate Accounts for Variable Annuities

An insurer may not use 75% or more of the market value of a separate account's assets to acquire any issuer's securities, other than those issued or guaranteed by the United States, if the securities exceed 10% of the market value of the separate account's assets.

Solicitation Requirements Purpose and Scope

An insurer must give life insurance buyers any information that will improve his/her ability to evaluate the relative costs of similar plans and select the most appropriate plan or his/her understanding of a policy's basic features.

Termination of Appointment

An insurer must notify the Commissioner within 30 days after terminating a producer's appointment. The insurer must also send the producer a copy of the termination notice within 15 days after sending the notice to the Commissioner. A producer may file written comments about the termination with the Commissioner and the insurer within 30 days after receiving the notice. The Commissioner, an insurer, and a producer, in the absence of actual malice, may not be held liable for making information available to regulatory or law enforcement agencies.

service representative

An insurer's or managing general agent's salaried employee, other than an insurer's officer, manager, or managing general agent, who works with producers in selling or negotiating only property insurance.

Disclosure Requirements

An insurer's or producer's failure to provide a Buyer's Guide or a Policy Summary constitutes a misrepresentation of the policy's benefits, advantages, conditions, or terms. A producer must leave all written advertisements for a policy with the applicant.

Exemptions Replacement regulations do not apply to:

Annuities Credit life insurance Group life insurance Life insurance issued with a qualified benefit plan Variable life insurance with variable death benefit and cash value An existing insurer's contractual change or conversion privilege Nonconvertible, nonrenewable term life insurance expiring within 5 years Life policies replacing binders or receipts from the same insurer

This applies to any solicitation, negotiation, or procurement, but does not apply to:

Annuities Credit, group, or variable life insurance Life policies issued with pension and welfare plans subject to ERISA Life policies with an equivalent level death benefit of $5,000 or less and an annual premium of $200 or less

Definition of Conservation

Any effort by an existing insurer or producer to continue existing life insurance after receiving a Notice Regarding Replacement from the replacing insurer.

Direct-Response Sale

Any life insurance sale in which the insurer does not use a producer to sell or deliver the policy.

For separate accounts, insurers may not acquire:

Any securities of the insurer's subsidiary Over 10% of the total voting securities of any other issuer A separate account's assets must be valued at market value on the date of valuation or, if there is no readily available market, as provided under the contract's terms

The minimum capital required to form and organize a new domestic stock life insurance company in Alabama is: A $50,000 B $1,000,000 C $2,000,000 D $500,000

B

Rebating occurs when a producer: A Uses pressure tactics to convince the applicant to replace an existing policy with a new one B Gives a prospect a discount or kickback in order to induce a sale C Fails to provide a conditional receipt upon receiving a signed application with payment of premium D Has made derogatory remarks regarding another insurance company to the applicant

B Rebating, the practice of splitting commission with a prospect, is illegal in almost every state and is punishable by loss of license.

Illustration - This must be 1 of the 3 types defined below:

Basic Supplemental In-force

Standards for Supplemental Illustrations A supplemental illustration must:

Be given with or after a basic illustration State that nonguaranteed elements are not guaranteed Show the same premium shown in the basic illustration Show the nonguaranteed elements the same or less favorably than those shown in the basic illustration Refer the insured to the basic illustration for important information

Customer Protection Regulations Federal banking agencies are prohibited from leading a customer to believe that he/she, in order to receive credit, must:

Buy an insurance product from such agency Agree not to get an insurance product from an unaffiliated entity

Which of the following can be listed on an illustration? A The dividend option selected or any nonguaranteed elements B The proposed insured's name, age, gender, and the initial death benefit C All of the answers listed D The insurer's name, producers name, address, and the policy generic name

C All of these can and should be listed on a life insurance illustration.

The Federal Americans with Disabilities Act

The Americans with Disability Act makes it illegal for employers with 15 or more employees to discriminate on the basis of disability.

A producer may have his or her license revoked or suspended for all of the following reasons, except: A Providing incorrect, misleading, incomplete information to the Commissioner B Forging another's name on an insurance document C Failure to pay state income tax D Failing to pay a traffic ticket on time

D An overdue traffic ticket would not cause an insurance license suspension or revocation. The other answers would constitute license suspension, revocation or nonrenewal

All of the following are true regarding advertising in life insurance, except: A Advertisements may not omit the words 'life insurance' or 'annuity' from a policy's name B Any reference to policy dividends must state that they are not guaranteed C Premiums cannot be referred to as 'deposits', 'deposit premiums', or 'investments', they may be referred to as 'premiums' only D Premiums cannot be mentioned in an advertisement at all

D Premiums MAY be mentioned, but only as premiums. NOT as Deposits, Deposit premiums or Investments. Advertisements MUST indicate clearly what the product is advertising. Dividends MUST state that they are Not Guaranteed.

Which of the following would be defined as a replacement under Alabama State Law? A A policyowner is covered by a group term policy and decides to cancel an existing permanent policy B All of the answers listed C A policyowner converts a term policy to a permanent policy D A policyowner cancels a policy in order to purchase a new policy

D Replacement is cancelling or changing an existing policy to purchase a new policy. Examples of replacement are: Purposefully lapsing, forfeiting, surrendering or terminating an existing policy. Exercising a nonforfeiture option on an existing policy to buy a new policy, such as: Reduced Paid Up, Extended Term. Etc. Converting term to a permanent policy is allowed and is not considered to be replacement. Cancelling an existing permanent policy because you are covered by group term is also not replacement.

The Commissioner may:

Delegate powers to his/her representatives Examine the insurance affairs of any: General agent, producer, surplus line broker, solicitor, or adjuster Person having a contractual right, or a right through power of attorney, to manage or control an insurer Person promoting or forming a domestic insurer, insurance holding corporation, or corporation to finance a domestic insurer Attorney of a reciprocal insurer Corporation that a domestic insurer controls

Penalties for Violations

Each violation of insurance law is punishable as a misdemeanor, upon conviction, by a fine of not more than $1,000, imprisonment in the county jail, or by sentence to Hard Labor for the county, for a period not to exceed 1 year, or by both a fine and imprisonment or hard labor in the discretion of the court.

Replacement Purpose Replacement regulations require insurers and producers to protect life policyowners' interests by:

Establishing minimum standards of conduct for replacement Assuring that policyowners get information to make decisions in their best interests Reducing the opportunity for misrepresentation and incomplete disclosure Establishing penalties for noncompliance

Pure endowment - Dividends

For participating contracts, the insurer must determine and apportion dividends annually

If replacement is involved, the producer must:

Give the applicant a Notice Regarding Replacement signed by the applicant at the time the application is written Give a list of all existing life insurance to be replaced to the replacing insurer Leave all sales proposals used with the applicant Submit a copy of the signed Notice Regarding Replacement and a copy of all sales proposals used to the replacing insurer A producer using a sales proposal to conserve existing life insurance must give all sales proposals used to the applicant and submit a copy of them to the existing insurer.

Annuities and Pure Endowments An annuity or pure endowment contract must contain the following provisions:

Grace Period Incontestability Dividends Reinstatement

Life Laws Required Policy Provisions Life policies (except industrial, group, and pure endowments) must contain the following provisions:

Grace period Incontestability Reinstatement Settlement of death benefit

If a domestic insurer becomes impaired, the Association may:

Guarantee or reinsure the insurer's covered policies Pay the insurer's contractual obligations Loan money to the insurer

If an insurer becomes insolvent, the Association must:

Guarantee, assume, or reinsure the insurer's covered policies Pay the insurer's contractual obligations Provide the necessary means to discharge such duties Any person receiving Association benefits is deemed to have assigned his/her rights under the policy to the Association to the extent of the benefits received. The Association's aggregate liability may not exceed $100,000 in cash values or $300,000 for all benefits, including cash values, with respect to any one life. The Association may exercise the powers of a domestic insurer in order to perform its duties.

Opt-Out or Opt-In Standard

Health information, such as that acquired during a medical exam, is subject to an opt-out or opt-in standard, meaning a customer can opt in or out from allowing companies to share information it has about them to others. Health information is subject to a stricter Opt-In rule, they must get specific permission first. The ability to prohibit any information sharing would seriously limit a company's ability to manage the underwriting of a policy and detect fraud before it happens. For this reason, there are several exceptions to an individual's right to Opt-Out of information sharing; for example, companies are always permitted to share information with their affiliates, like the MIB, etc. to help prevent fraud. If a company wishes to share information about a customer's health with a third party, the customer must actively opt-in to allowing the disclosure.

A contract must state:

If it does not provide a cash surrender benefit or a death benefit of at least the minimum nonforfeiture amount The mortality table and interest rates used in calculating any minimum guaranteed paid-up, cash surrender, or death benefits That any paid-up, cash surrender, or death benefits must be at least the minimum benefits required by any statute of the state in which the contract is delivered

Life and Disability Insurance Guaranty Association This Association protects insureds, beneficiaries, annuitants, and their assignees from insurer insolvency. To provide this protection:

The Association guarantees payment of benefits and continuation of coverages The Association's member insurers are assessed for the Association's expenses, obligations, and other costs The Association helps the Commissioner detect and prevent insurer impairment and insolvency

TEST TIP 1

Know that the Commissioner can grant or deny an agent request for an extension to comply with the continuing education requirements. The following time limits to comply would apply: 90 days if granted, 30 days if denied

TestTIP 2

Know the following CE Common Test Point: 24 hours CE required every 2 years, 3 must be in ethics

Replacement- Any transaction in which new life insurance is to be purchased, and through the purchase, existing life insurance has been or will be:

Lapsed, forfeited, surrendered, or terminated Converted to reduced paid-up insurance, continued as extended term insurance, or reduced in value by the use of nonforfeiture benefits Amended with reduced benefits or term Reissued with a reduced cash value Pledged as collateral or subjected to borrowing for over 25% of the policy's loan value Converting a term plan to a permanent plan is not replacement. Exercising non-forfeiture options, reducing policy benefits, and lapsing a policy in order to purchase a new policy, is replacement.

Regulation

Legislative, judicial, and self-regulation are all important sources of regulation in the insurance industry.

Industrial Life Insurance

Life policies with face amounts of $2,500 or less, the words "industrial policy" on the first page, and premiums payable monthly or more often.

Powers and Duties The Commissioner's powers and duties include:

Organizing and supervising the Department of Insurance Enforcing insurance law Executing agreements with federal and state governmental entities and private persons Examining and investigating insurance matters, such as:Market conduct, which falls under the States DOI Non-Financial Regulatory activitiesCompanies, agents and records for compliance Invoking remedy for enforcing orders or insurance law

Illustrations Purpose and Applicability The regulation of life policy illustrations:

Protects consumers and fosters their education Provides formats, prescribes standards for the use of illustrations, and requires disclosures Ensures that illustrations do not mislead life policy buyers Makes illustrations more understandable Applies to all life policies and certificates except: Variable life insurance Individual and group annuities Credit life insurance Life policies with illustrated death benefits, on any individual, of $10,000 or less

Incontestability

The policy is incontestable after being in force, during the insured's lifetime, for 2 years from the issue date.

Guaranteed Elements

The premiums, benefits, values, credits, or charges determined at the life policy's issuance

Nonguaranteed Elements

The premiums, benefits, values, credits, or charges not determined at the life policy's issuance.

When using an illustration to sell a life policy, an insurer or producer may not

Represent the policy as anything other than a life policy Misleadingly use nonguaranteed elements Imply that nonguaranteed elements are guaranteed Use an illustration that violates insurance law, is not self-supporting, is lapse-supported (unless the policy cannot develop nonforfeiture values), or shows policy performance as more favorable than that produced by the insurer's illustrated scale Give an applicant an incomplete illustration Falsely represent that premium payments are not required each policy year to maintain illustrated death benefits Use the term "vanishing premium" or a similar term implying that the policy becomes paid-up by using nonguaranteed elements to pay future premiums

TEFRA - Tax Equity and Fiscal Responsibility Act of 1982

TEFRA is intended to prevent group plans from discriminating in favor of Key Employees, including officers, the top 10 interest-holders in the employer, or owning more than 1% who are compensated annually at $150,000 or more. Maximum benefits are required in plans when benefits for key employees might be greater than for other employees.

TEST TIP 1 A consumer is a prospect that a producer has not yet entered into a business relationship with.

TEST TIP 2 A customer has already conducted business with a producer.

Hearings

The Commissioner may hold a hearing for any purpose he/she deems necessary. He/she may suspend or postpone an action's effective date, pending a hearing. The Commissioner must hold a hearing if required by law, or upon written demand by a person aggrieved by any act of the Commissioner. The hearing must be held within 30 days after the Commissioner receives a demand.

Appointment and Qualifications

The Commissioner of Insurance is selected based on training, experience, and capacity. He/she is appointed by the Governor for the duration of the Governor's term of office. If the Commissioner becomes a candidate for public office or becomes a member of a political committee, he/she must immediately vacate the office of Commissioner.

Sales producers are required to get the consumer's acknowledgement that the producer disclosed orally and in writing:

The acts prohibited by customer protection regulations If the product has an investment risk or is not insured by the FDIC, the federal government, or the depository institution

Pure endowment- Reinstatement

The contract may be reinstated within 1 year after default, if the cash surrender value has not been paid, by paying all indebtedness and providing evidence of insurability

TEST TIP

The following are common on Exams: Limits $100,000 cash values or $300,000 for all benefits on one life Guarantees payment of benefits Reinsures the insurer's covered policies Pays the insurer's contractual obligations Will loan money to the insurer

Contract Premium

The gross premium payable under a fixed premium policy

General Rules and Prohibitions An illustration used to sell a life policy must be labeled "Life Insurance Illustration" and state:

The insurer's name The producer's name and business address The proposed insured's name, age, and sex, unless a composite illustration is permitted The illustration's underwriting or rating classification The policy's generic name, product name (if different), and form number The initial death benefit The dividend option election or application of nonguaranteed elements, if applicable

Gramm-Leach-Bliley Act (GLBA)

This Act requires federal banking agencies to publish customer protection regulations for insurance and to establish a consumer grievance process. A customer is a consumer with whom an agency has an established business relationship. Different rules apply as to each regarding privacy and do not call restrictions.

Grace Period - Pure endowment s

This period must be 1 month of at least 30 days. The contract may charge interest, pro rata, of up to 6% per year. Any claim during this period may be reduced by the premium and interest payable.

Grace Period - industrial life

This period must be 4 weeks for any premium other than the first premium, except that, under policies with premiums payable monthly, it must be 1 month of at least 30 days. During this period, the policy must stay in force, and any overdue and unpaid premiums may be deducted from a settlement.

Negotiate

To confer with or offer advice to a policy buyer about a policy's benefits, terms, or conditions (this definition applies only if the person doing the negotiating sells insurance).

License Requirement

To deliver variable contracts, an insurer must be a licensed life insurer in Alabama, and the Commissioner must be satisfied that the insurer's condition is not hazardous to the public or to policyholders.

Variable Contracts

Variable contracts providing variable benefits state the procedures the insurer must follow to determine the amount of variable benefits. They must state that the amount of values and benefits vary to reflect investment experience. Variable annuity contracts may include an incidental death benefit during the deferred period of up to the greater of the premiums paid or the contract's value.

Settlement of Death Benefit

When an insured dies, the insurer must settle upon receiving proof of death and, at the insurer's option, surrender of the policy and proof of the claimant's insurable interest. A policy may not delay a settlement payment beyond 2 months from the date the insurer receives proof of death.

Duties of Producers The producer also must submit a statement signed by the applicant as to whether the insurance will replace existing life insurance. The form describes things to consider and to review before considering such an option, such as:

You may be subject to surrender charges on your existing policy upon surrender You may be able to change your existing policy to accommodate your needs without having to cancel or surrender your existing policy You will be required to purchase the new policy at your current age and therefore might experience a significant premium increase Financing a new purchase by using the cash value from another existing policy will reduce the value of your existing policy and may also reduce the amount paid upon the death of the insured

Pure endowment - Incontestibility

he contract is incontestable after being in force, during the insured's lifetime, for 2 years from the date of issuance, except for nonpayment.