§ 27-72-10. Disclosure to insurer.
(a) Without limiting the ability of an insurer from assessing the insurability of a policy
applicant and determining whether or not to issue the policy, and in addition to other
questions an insurance carrier may lawfully pose to a life insurance applicant, insurance
carriers may inquire in the application for insurance whether the proposed owner intends
to pay premiums with the assistance of financing from a lender that will use the policy
as collateral to support the financing.
(1) If, as described in this chapter, the loan provides funds that can be used for a purpose
other than paying for the premiums, costs, and expenses associated with obtaining
and maintaining the life insurance policy and loan, the application shall be rejected
as a violation of the prohibited practices in §â€‚27-72-13.
(2) If the financing does not violate §â€‚27-72-13, the insurance carrier:
(i) May make disclosures, including but not limited to such as the following, to the applicant
and the insured, either on the application or an amendment to the application to be
completed no later than the delivery of the policy:
"If you have entered into a loan arrangement where the policy is used as collateral,
and the policy does change ownership at some point in the future in satisfaction of
the loan, the following may be true:
(A) A change of ownership could lead to a stranger owning an interest in the insured's
life;
(B) A change of ownership could in the future limit your ability to purchase future insurance
on the insured's life because there is a limit to how much coverage insurers will
issue on one life;
(C) Should there be a change of ownership and you wish to obtain more insurance coverage
on the insured's life in the future, the insured's higher issue age, a change in health
status, and/or other factors may reduce the ability to obtain coverage and/or may
result in significantly higher premiums;
(D) You should consult a professional advisor, since a change in ownership in satisfaction
of the loan may result in tax consequences to the owner, depending on the structure
of the loan�; and
(b) May require certifications, such as the following, from the applicant and/or the insured:
(1) "I have not entered into any agreement or arrangement providing for the future sale
of this life insurance policy�;
(2) "My loan arrangement for this policy provides funds sufficient to pay for some or
all of the premiums, costs, and expenses associated with obtaining and maintaining
my life insurance policy, but I have not entered into any agreement by which I am
to receive consideration in exchange for procuring this policy�; and
(3) "The borrower has an insurable interest in the insured.�