SUBCHAPTER IV
TRUSTING ALTERNATIVES
523A.401 Purchase agreements funded by insurance proceeds.
1.A purchase agreement may be funded by insurance proceeds derived from a new or
existing insurance policy issued by an insurance company authorized to do business and
doing business within this state.
2.Such funding may be in lieu of the trusting requirements of this chapter when the
purchaser assigns the proceeds of an existing insurance policy.
3.Such funding may be in lieu of the trusting requirements of this chapter when a new
insurance policy is purchased to fund the purchase agreement, with a face amount equal to
or greater than the current retail price of the cemetery merchandise, funeral merchandise,
and funeral services to be delivered under the purchase agreement or, if less, a face
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SUBCHAPTER IV
TRUSTING ALTERNATIVES
523A.401 Purchase agreements funded by insurance proceeds.
1. A purchase agreement may be funded by insurance proceeds derived from a new or
existing insurance policy issued by an insurance company authorized to do business and
doing business within this state.
2. Such funding may be in lieu of the trusting requirements of this chapter when the
purchaser assigns the proceeds of an existing insurance policy.
3. Such funding may be in lieu of the trusting requirements of this chapter when a new
insurance policy is purchased to fund the purchase agreement, with a face amount equal to
or greater than the current retail price of the cemetery merchandise, funeral merchandise,
and funeral services to be delivered under the purchase agreement or, if less, a face amount
§523A.401, CEMETERY AND FUNERAL MERCHANDISE AND FUNERAL SERVICES 12
equal to the total of all payments to be submitted by the purchaser pursuant to the purchase
agreement.
4. If a preneed funeral purchase agreement contains a provision stating that the
agreement will be funded by the purchase of a new insurance policy, the insurance producer
who sells the insurance policy that will fund the purchase agreement shall require that any
payment made by the purchaser shall be made payable only to the insurance company
designated in the purchase agreement. The insurance producer shall remit the insurance
policy application and the premium made payable to the insurance company designated
in the purchase agreement to the insurance company within thirty calendar days after
execution of the purchase agreement or, with respect to a purchase agreement that provides
for periodic payments, the premiums shall be paid directly by the purchaser to the insurance
company that issues the insurance policy.
5. Any new insurance policy shall satisfy the following conditions:
a. Except as necessary and appropriate to satisfy the requirements regarding burial trust
funds under Tit. XIX of the federal Social Security Act, the policy shall not be owned by
the seller, the policy shall not be irrevocably assigned to the seller, and the assignment of
proceeds from the insurance policy to the seller shall be limited to the seller’s interests as
they appear in the purchase agreement, and conditioned on the seller’s delivery of cemetery
merchandise, funeral merchandise, and funeral services pursuant to a purchase agreement.
b. The policy shall provide that any assignment of benefits is contingent upon the seller’s
delivery of cemetery merchandise, funeral merchandise, and funeral services pursuant to a
purchase agreement.
c. The policy shall have an increasing death benefit or similar feature that provides some
means for increasing the funding as the cost of cemetery merchandise, funeral merchandise,
and funeral services increases.
6. With the written consent of the purchaser, an existing prepaid purchase agreement
with trust-funded benefits may be converted to a prepaid purchase agreement with
insurance-funded benefits provided the seller and the insurance benefits comply with the
following provisions:
a. The transfer of the trust funds to the insurance company must be at least equal to the
full sum required to be deposited as trust principal under the trust-funded prepaid purchase
agreement plus all net earnings accumulated with respect thereto, as of the transfer date.
Commissions, allowances, surrender charges or other forms of compensation or expense
loads, premium expense, administrative charges or expenses, or policy fees shall not be
deducted from the trust funds transferred pursuant to the conversion.
b. The face amount of any insurance policy issued on an individual must be no less than
the amount of principal and interest transferred for that individual to the insurance company,
and any supplemental insurance policy issued to cover the unfunded portion of the purchase
agreementmusthaveafaceamountthatisatleastasgreatastheunfundedprincipalbalance.
The face amount of the insurance purchased shall not, under any circumstances, be less
than the total of all payments made by the purchaser pursuant to the agreement plus all net
earnings accumulated with respect thereto, as of the transfer date.
c. The insurance policy shall not be contestable, or limit death benefits in the case of
suicide, with respect to that portion of the face amount of the policy that is required by
paragraph “b”. The policy shall not refer to physical examination, or otherwise operate as
an exclusion, limitation, or condition other than requiring submission of proof of death or
surrender of policy at the time the prepaid purchase agreement is funded, matures, or is
canceled, as the case may be.
d. The seller shall maintain a copy of any prepaid trust-funded purchase agreement that
was converted to a prepaid insurance-funded purchase agreement and retain the payment
historyrecordsforeachconvertedpurchaseagreementpriortoconversionuntilthecemetery
merchandise, funeral merchandise, and funeral services have been delivered.
7. The seller of a purchase agreement subject to this chapter which is to be funded by
insurance proceeds shall obtain all licenses required to be obtained and comply with all
reporting requirements under this chapter. A parent company, provider, or seller shall
13 CEMETERY AND FUNERAL MERCHANDISE AND FUNERAL SERVICES, §523A.402
not pledge, borrow from, or otherwise encumber an insurance policy funding a purchase
agreement.
8. An insurance company issuing policies funding purchase agreements subject to this
chapter shall file an annual report with the commissioner on a form prescribed by the
commissioner. The report shall list the applicable insurance policies outstanding for each
seller.
9. The commissioner, by rule, may require written trust agreements and establish
conditions for trusts holding insurance policies or maintaining ownership rights under
insurance policies. The seller or any officer, director, agent, employee, or affiliate of the seller
shall not serve as a trustee. The commissioner may require amendments to a trust agreement
that is not in accord with the provisions of this chapter or rules adopted under this chapter.
10. All records maintained by the commissioner under this section shall be confidential
pursuant to section 22.7, subsection 58, and shall not be made available for inspection
or copying except upon approval of the commissioner or the attorney general, or except
when sought by the insurance company to whom the records relate. Such records shall be
privileged and confidential in any judicial or administrative proceeding except any of the
following:
a. An action commenced by the commissioner.
b. An administrative proceeding brought by the insurance division.
c. An action or proceeding which arises out of the criminal provisions of the laws of this
state or of the United States.
d. An action brought by the insurance division or the attorney general to recover moneys
for embezzlement, misappropriation, or misuse of trust funds.