MN Rules & Regulations Re: Life Insurance

*Group life continuing coverage* Can you convert your group policy to an individual policy? If so, what are the general terms?

Yup! It's just at your expense (or your spouses or dependent's). No further evidence of insurability, and no need to interrupt coverage.

*replacement policies* If a replacement is involved, what "notice" must the agent/broker present to the applicant?

"Notice regarding replacement" on a form approved by the Commissioner. Must be completed and signed by both applicant and agent/broker, and must be left with applicant.

*STOLI/fraud* If someone *willfully* violates the Insurable Interest Act and receives a death benefit, what might the court charge them?

-Actual damages -Exemplary damages up to 2X death benefit, paid to govt agencies that combat consumer fraud, like the Dept of Commerce.

How soon must insurer return all payments made, after receiving cancellation notice?

10 days

*replacement policies* What is the free look period for replacement policies?

30 days refund guaranteed!

*replacement policies* How long does insurer have to maintain records that all requirements were met for?

6 years

*Group life continuing coverage* After termination/layoff, how long does the employee have to elect to continue coverage?

60 days to elect to continue coverage.

*replacement policies* If you solicit a replacement policy through direct response, what does the insurer have to send to the applicant?

A commissioner-approved replacement notice, along with policy or contract. This is less stuff than the in-person contracting.

Insurance policies are required to include a notice about the cancellation policy. If for some reason it doesn't include this notice, how long can the owner cancel the policy for (and then get a refund)?

A whole year! Then insurer must return entire consideration paid within 10 days after receiving notice of cancellation.

*STOLI* Any agreement to sell or acquire a policy is presumed to be STOLI if within the first ____ years of the contract.

Any agreement to sell or acquire a policy is presumed to be STOLI if within the first 4 years of the contract.

*STOLI* Why are stranger-oriented life insurance practices so problematic?

Because the third-party investor has no insurable interest in the insured.

*Credit insurance* What about credit accident and health insurance?

Credit accident and health insurance covers debt payments while debtor is disabled.

*Credit insurance* What is credit life insurance?

Credit life insurance = benefit tied to specific loan. Face amount decreases with time, if memory serves.

How can you communicate cancellation?

Either by mail or in person, but in writing.

*STOLI/fraud* What are the possible punishments for fraud?

Fine, imprisonment, restitution.

What is the free look period and how long is it?

Free look = period of time you can return the policy and cancel it with written notice. Minimum: within 10 days of receiving it

*Policy provisions required in Minnesota* What is the grace period provision?

Grace period provision = once month grace period after premium due date for policyowner to make payment, during which policy continues in force. BUT you can charge a late fee, and the premium can be deducted from death benefit if insured dies during that time.

*STOLI* If an insurer receives a request for change of ownership/beneficiary within the first _____ years, the policyowner must complete a written questionnaire approved by the ________.

If an insurer receives a request for change of ownership/beneficiary within the first 4 years, the policyowner must complete a written questionnaire approved by the Commissioner.

*Credit life insurance* Initial amount of credit life insurance can't exceed _______ plus _______

Initial amount of credit life insurance cannot exceed *the amount of principal repayable* PLUS *an amount equal to one monthly payment*

*Credit life insurance* Insurance on educational, agricultural, and horticultural credit commitments can be written on a (level/increasing/decreasing?) term plan for loan amount

Insurance on educational, agricultural, and horticultural credit commitments can be written on a level term plan for loan amount

If the term of the loan is more than 63 months (5.25 years), amount of credit life insurance can't exceed ______ LESS ______ PLUS _______

Loan > 63 months --> amount of insurance can't exceed *amount of unpaid debt* LESS unearned interest/finance charges PLUS amount of two monthly payments

*Policy provisions required/allowed in Minnesota* What does MN law say about backdating a policy?

MN law allows you to issue a policy that takes effect up to 6 months before application date, if you're a company based or organized in MN.

*STOLI* Is there ever a situation in which a lender receives proceeds, fees, or other consideration in addition to the $$ required to pay principal, interest, and service charges related to policy premiums?

No! That $$ would have to be remitted to insured's estate.

If you cancel a policy in the free look period, was it still in force for those ten days?

No, it's void.

*Credit accident and health insurance* Can you take out insurance for more than the amount of the loan (either lump sum or periodic payments)?

Nope! Must be equal to loan amount.

*Insurable interests* A trustee, sponsor, or custodian of assets held in any ERISA/retirement plan is considered to have an insurable interest in a plan participant's life, as long as the participant does what before the insurance purchase?

Provides written consent prior to insurance purchase! Same applies if you're part of a business entity and your other partners take out a policy against you.

*STOLI/fraud* If someone gets a death benefit due to a nonwillful violation of the Insurable Interest Act, what might the court limit the recovery to?

Recovery may be "unjust enrichment," meaning they pay benefits received plus interest from date of receipt, less premiums and any consideration paid by recipient in connection with the policy.

If the policy is a replacement, what's the minimum # of days to cancel?

Replacement policy = 30 days to cancel.

*Group life continuing coverage* The employer must inform employee of option to continue coverage. What happens if they don't, or if the employee does notify them but employer doesn't pay insurer?

The employer is still liable for coverage in that case.

*Credit life insurance* If the loan you're taking insurance out against has a variable rate, what rate does the insurance policy use to determine the loan amount?

The initial rate or the scheduled rates based on the initial index

*STOLI* When an insurer gets a request for change of ownership or beneficiary, how soon do they have to confirm or deny it?

Within 30 days. If denying it, they've gotta give a reason.

*Consent of insured* An insured person doesn't always have legal capacity to enter a contract. Under what situation may an attorney-in-fact consent to a policy on behalf of an insured?

For the limited purpose of replacing a policy with a new, very similar policy (aggregate amount of insurance stays the same or decreases)

*insurable interests* how does a financial institution/debt provider have an interest in seeing the debtor live?

They want their darn money back!

*Group life continuing coverage* If employee dies in that 60 day window without electing continuation, are they considered covered or not?

They're considered covered, and therefore are entitled to death benefit minus any unpaid premium owed.

*Insurance Interest Act* What is the purpose of this Act?

To prohibit people from soliciting life insurance policies to sell on the secondary market. AKA prohibits stranger-originated life insurance practices in Minnesota.

If by mail, when is notice of policy cancellation effective?

Upon being postmarked, properly addressed, and postage prepaid.

*STOLI* What are some other indications that a policy settlement might be STOLI?

-Premiums are paid by someone other than insured or close relative, or other person with insurable interest -The insured underwent a life expectancy evaluation in last 18 months and those results were shared with someone else.

*replacement policies* Once replacing insurer gets the fully signed replacement notice, what do they need to send to the existing insurer?

-Written communication advising of replacement or proposed replacement and ID information -Must be done within 5 working days of application reception, or the day the contract is issued, whichever is sooner.

*replacement policies* What are some examples of replacement policies that aren't effected by the aforementioned laws?

-credit life insurance -group life insurance/annuities -replacement with existing insurer

*replacement policies* What else must the agent/broker give to the applicant/do in a replcaement?

-original or copy of written/printed communications used for presentation -submit to replacing insurer a copy of the replacement notice, along with application.

*Replacement policies* An agent who initiates an application has to submit these two things with each life insurance/annuity application

Signed statements by both the applicant and agent/broker saying whether a replacement is involved.

*Group life provisions* In MN, do you have options for continuing coverage in the event that you are voluntarily or involuntarily terminated?

Yes, MN mandates that the employee is allowed to continue coverage (unless it's for gross misconduct). You can do this for 18 months, or until you get covered under a difference policy.

*Group life continuing coverage* If you're continuing coverage after termination, who do you pay premiums to? And what % can premiums NOT exceed?

You pay premiums to your employer, and can't exceed 102% of the plan cost.

*Credit accident and health insurance* Say you want the insurance to pay off the final payment of a balloon loan, OR for a period that exceeds the age limitation in the policy, OR for an amount that exceeds the insurer's max liability limits. How can you do that?

You simply cannot!