§ 508E.8 — Disclosure to viator

Iowa § 508E.8

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 508E: VIATICAL SETTLEMENT CONTRACTS

Text

1. With each application for a viatical settlement, a viatical settlement provider or viatical
settlement broker shall provide the viator with at least the following disclosures no later
than the time the application for the viatical settlement contract is signed by all parties. The
disclosures shall be provided in a separate document that is signed by the viator and the
viaticalsettlementproviderorviaticalsettlementbroker, andshallprovideallofthefollowing
information:
a. There are possible alternatives to viatical settlement contracts including any
accelerated death benefits or policy loans offered under the viator’s life insurance policy.
b. That a viatical settlement broker represents exclusively the viator, and not the insurer
or the viatical settlement provider, and owes a fiduciary duty to the viator, including a duty to
act according to the viator’s instructions and in the best interest of the viator.
c. Some or all of the proceeds of the viatical settlement may be taxable under federal
income tax and state franchise and income taxes, and assistance should be sought from a
professional tax advisor.
d. Proceeds of the viatical settlement could be subject to the claims of creditors.
e. Receipt of the proceeds of a viatical settlement may adversely affect the viator’s
eligibility for Medicaid or other government benefits or entitlements, and advice should be
obtained from the appropriate government agencies.
f. The viator has the right to rescind a viatical settlement contract before the earlier of
thirty days after the date upon which the viatical settlement contract is executed by all parties
or fifteen days after the viatical settlement proceeds have been paid to the viator, as provided
in section 508E.10, subsection 3. Rescission, if exercised by the viator, is effective only if both
notice of the rescission is given, and the viator repays all proceeds and any premiums, loans,
and loan interest paid on account of the viatical settlement within the rescission period. If the
insured dies during the rescission period, the viatical settlement contract shall be deemed to
have been rescinded, subject to repayment by the viator or the viator’s estate of all viatical
settlement proceeds and any premiums, loans, and loan interest that have been paid by the
viatical settlement provider or purchaser within sixty days of the insured’s death.
13 VIATICAL SETTLEMENT CONTRACTS, §508E.8
g. Funds will be sent to the viator within three business days after the viatical settlement
provider has received the insurer’s or group administrator’s written acknowledgment that
ownership of the policy or interest in the certificate has been transferred and the beneficiary
has been designated.
h. Enteringintoaviaticalsettlementcontractmaycauseotherrightsorbenefits, including
conversion rights and waiver of premium benefits, that may exist under the policy or
certificate, to be forfeited by the viator. Assistance should be sought from a financial adviser.
i. Disclosure to a viator shall include distribution of a brochure describing the process
of viatical settlements. The national association of insurance commissioners form for the
brochure shall be used unless another form is developed and approved by the commissioner.
j. The disclosure document shall contain the following language:
All medical, financial, or personal information solicited or
obtained by a viatical settlement provider or viatical settlement
broker about an insured, including the insured’s identity or the
identity of family members, a spouse, or a significant other may
be disclosed as necessary to effect the viatical settlement between
the viator and the viatical settlement provider. If you are asked
to provide this information, you will be asked to consent to the
disclosure. The information may be provided to someone who buys
the policy or provides funds for the purchase. You may be asked to
renew your permission to share information every two years.
k. Followingexecutionofaviaticalcontract, theinsuredmaybecontactedforthepurpose
of determining the insured’s health status and to confirm the insured’s residential or business
street address and telephone number, or as otherwise provided in this chapter. This contact
shall be limited to once every three months if the insured has a life expectancy of more than
one year, and no more than once per month if the insured has a life expectancy of one year
or less. All such contacts shall be made only by a duly licensed viatical settlement provider
or by the authorized representative of a duly licensed viatical settlement provider.
2. A viatical settlement provider shall provide the viator with at least the following
disclosures no later than the date the viatical settlement contract is signed by all parties.
The disclosures shall be conspicuously displayed in the viatical settlement contract or in a
separate document signed by the viator and provide all of the following information:
a. The affiliation, if any, between the viatical settlement provider and the issuer of the
insurance policy to be viaticated.
b. The name, business address, and telephone number of the viatical settlement provider.
c. Ifaninsurancepolicytobeviaticatedhasbeenissuedasajointpolicyorinvolvesfamily
ridersoranycoverageofalifeotherthantheinsuredunderthepolicytobeviaticated,anotice
of the viator’s possible loss of coverage on the other lives under the policy and to consult with
the viator’s insurance producer or the insurer issuing the policy for advice on the proposed
viatical settlement.
d. The dollar amount of the current death benefit payable to the viatical settlement
provider under the policy or certificate. If known, the viatical settlement provider shall also
disclose the availability of any additional guaranteed insurance benefits, the dollar amount
of any accidental death and dismemberment benefits under the policy or certificate, and the
extent to which the viator’s interest in those benefits will be transferred as a result of the
viatical settlement contract.
e. Whether the funds will be escrowed with an independent third party during the
transfer process, and if so, provide the name, business address, and telephone number of
the independent third-party escrow agent, and the fact that the viator or owner may inspect
or receive copies of the relevant escrow or trust agreements or documents.
3. A viatical settlement broker shall provide the viator with at least the following
disclosures no later than the date the viatical settlement contract is signed by all parties.
The disclosures shall be conspicuously displayed in the viatical settlement contract or in a
separate document signed by the viator and provide all of the following information:
a. The name, business address, and telephone number of the viatical settlement broker.
§508E.8, VIATICAL SETTLEMENT CONTRACTS 14
b. A full, complete, and accurate description of all offers, counteroffers, acceptances, and
rejections relating to the proposed viatical settlement contract.
c. Anyaffiliationsorcontractualarrangementsbetweentheviaticalsettlementbrokerand
any person making an offer in connection with the proposed viatical settlement contracts.
d. The amount and method of calculating the broker’s compensation. As used in this
paragraph, “compensation” includes anything of value paid or given to a viatical settlement
broker for the placement of a policy.
e. Where any portion of the viatical settlement broker’s compensation, as defined in
paragraph “d”, is taken from a proposed viatical settlement offer, the broker shall disclose
the total amount of the viatical settlement offer and the percentage of the viatical settlement
offer comprised by the viatical settlement broker’s compensation.
4. If the viatical settlement provider transfers ownership or changes the beneficiary of the
insurance policy, the viatical settlement provider shall communicate in writing the change in
ownership or beneficiary to the insured within twenty days after the change.
5. A viatical settlement provider shall provide the viatical settlement purchaser with at
least the following disclosures prior to the date the viatical settlement purchase agreement
is signed by all parties. The disclosures shall be conspicuously displayed in any viatical
purchase contract or in a separate document signed by the viatical settlement purchaser
and viatical settlement provider or viatical settlement investment agent, and shall make the
following disclosure to the viatical settlement purchaser:
a. The viatical settlement purchaser will receive no returns including dividends and
interest, until the insured dies and a death claim payment is made.
b. The actual annual rate of return on a viatical settlement contract is dependent upon
an accurate projection of the insured’s life expectancy, and the actual date of the insured’s
death. An annual “guaranteed” rate of return is not determinable.
c. The viaticated life insurance contract should not be considered a liquid purchase since
it is impossible to predict the exact timing of its maturity and the funds probably are not
available until the death of the insured. There is no established secondary market for resale
of these products by the viatical settlement purchaser.
d. The viatical settlement purchaser may lose all benefits or may receive substantially
reduced benefits if the insurer goes out of business during the term of the viatical investment.
e. The viatical settlement purchaser is responsible for payment of the insurance premium
orothercostsrelatedtothepolicy, ifrequiredbythetermsoftheviaticalpurchaseagreement.
These payments may reduce the viatical settlement purchaser’s return. If a party other than
theviaticalsettlementpurchaserisresponsibleforthepayment, thenameandaddressofthat
party also shall be disclosed.
f. The viatical settlement purchaser is responsible for payment of the insurance premiums
or other costs related to the policy if the insured returns to health. The viatical settlement
provider shall disclose the amount of such premiums, if applicable.
g. The name, business address, and telephone number of the independent third party
providing escrow services and the relationship to the viatical settlement broker.
h. The amount of any trust fees or other expenses to be charged to the viatical settlement
purchaser shall be disclosed.
i. Whether the viatical settlement purchaser is entitled to a refund of all or part of the
viatical settlement purchaser’s investment under the viatical settlement contract if the policy
is later determined to be null and void.
j. That group policies may contain limitations or caps in the conversion rights, that
additional premiums may have to be paid if the policy is converted, the name of the party
responsible for the payment of the additional premiums, and, if a group policy is terminated
and replaced by another group policy, that there may be no right to convert the original
coverage.
k. The risks associated with policy contestability including but not limited to the risk that
the viatical settlement purchaser will have no claim or only a partial claim to death benefits
should the insurer rescind the policy within the contestability period.
l. Whether the viatical settlement purchaser will be the owner of the policy in addition to
being the beneficiary, and if the viatical settlement purchaser is the beneficiary only and not
15 VIATICAL SETTLEMENT CONTRACTS, §508E.10
also the owner, the special risks associated with that status, including but not limited to the
risk that the beneficiary may be changed or the premium may not be paid.
m. The experience and qualifications of the person who determines the life expectancy of
the insured, including in-house staff, independent physicians, and specialty firms that weigh
medical and actuarial data; the information this projection is based on; and the relationship
of the projection maker to the viatical settlement provider, if any.
n. A brochure describing the process of investment in viatical settlements. The national
association of insurance commissioners form for the brochure shall be used unless another
form is developed and approved by the commissioner.
6. A viatical settlement provider shall provide the viatical settlement purchaser with at
least the following disclosures no later than at the time of the assignment, transfer, or sale
of all or a portion of an insurance policy. The disclosures shall be contained in a document
signed by the viatical settlement purchaser and viatical settlement provider, and shall make
all of the following disclosures to the viatical settlement purchaser:
a. All the life expectancy certifications obtained by the provider in the process of
determining the price paid to the viator.
b. Whether premium payments or other costs related to the policy have been escrowed.
If escrowed, state the date upon which the escrowed funds will be depleted and whether the
viatical settlement purchaser will be responsible for payment of premiums thereafter and, if
so, the amount of the premiums.
c. Whether premium payments or other costs related to the policy have been waived. If
waived, disclose whether the viatical settlement purchaser will be responsible for payment
of the premiums if the insurer that wrote the policy terminates the waiver after purchase and
the amount of those premiums.
d. The type of policy offered or sold, i.e., whole life, term life, universal life, or a group
policy certificate, any additional benefits contained in the policy, and the current status of the
policy.
e. If the policy is term insurance, the special risks associated with term insurance
including but not limited to the viatical settlement purchaser’s responsibility for additional
premiums if the viator continues the term policy at the end of the current term.
f. Whether the policy is contestable.
g. Whethertheinsurerthatwrotethepolicyhasanyadditionalrightsthatcouldnegatively
affect or extinguish the viatical settlement purchaser’s rights under the viatical settlement
contract, what these rights are, and under what conditions these rights are activated.
h. Thenameandaddressofthepersonresponsibleformonitoringtheinsured’scondition.
The viatical settlement provider shall describe how often the monitoring of the insured’s
condition is done, how the date of death is determined, and how and when this information
will be transmitted to the viatical settlement purchaser.