40-5008. Same; required disclosures.
40-5008
40-5008. Same; required disclosures.(a) With each application for a viatical settlement, aviatical settlement provider or viatical settlement broker shall provide theviator with at least the following disclosures no later than the time theapplication for the viatical settlement contract is signed by all parties. Thedisclosures shall be provided in a separate document that is signed by theviator and the viatical settlement provider or viatical settlement broker, andshall provide the following information:
(1) There are possible alternatives to viatical settlement contractsincluding any accelerated death benefits or policy loans offered under theviator's life insurance policy.
(2) That a viatical settlement broker represents exclusively the viatorandnot the insurer or theviatical settlement provider. Furthermore the viatical settlement broker owes afiduciary duty tothe viator including the duty to act according to the viator's instructions andin the best interest ofthe viator.
(3) Some or all of the proceeds of the viatical settlementmay be taxableunder federal income tax and state franchise and income taxes, and assistanceshould be sought from a professional tax advisor.
(4) Proceeds of the viatical settlement could be subject tothe claims ofcreditors.
(5) Receipt of the proceeds of a viatical settlement mayadversely affect theviator's eligibility for medicaid or other government benefits or entitlements,and advice should be obtained from the appropriate government agencies.
(6) The viator has the right to rescind a viaticalsettlement contract for 15calendar days after the receipt of the viatical settlement proceeds by theviator, as provided in subsection (c) ofK.S.A. 2009 Supp.40-5009a andamendments thereto. Ifthe insured dies during the rescission period, the settlement contract shall bedeemed to have been rescinded, subject to repayment of all viatical settlementproceeds and any premiums, loans and loan interest to the viatical settlementprovider or purchaser.
(7) Funds will be sent to the viator within three businessdays after theviatical settlement provider has received the insurer or group administrator'sacknowledgment that ownership of the policy or interest in the certificate hasbeen transferred and the beneficiary has been designated.
(8) Entering into a viatical settlement contract may causeother rights orbenefits, including conversion rights and waiver of premium benefits that mayexist under the policy or certificate, to be forfeited by the viator.Assistance should be sought from a financial adviser.
(9) Disclosure to a viator shall include distribution of abrochuredescribing the process of viatical settlements. The form for the brochure shallbe developed by the commissioner.
(10) The disclosure document shall contain the followinglanguage: "Allmedical, financial or personal information solicited or obtained by a viaticalsettlement provider or viatical settlement broker about an insured, includingthe insured's identity or the identity of family members, a spouse or asignificant other may be disclosed as necessary to effect the viaticalsettlement between the viator and the viatical settlement provider. If you areasked to provide this information, you will be asked to consent to thedisclosure. The information may be provided to someone who buys the policy orprovides funds for the purchase. You may be asked to renew your permission toshare information every two years."
(11) The insured may be contacted by either the viaticalsettlement provideror viatical settlement broker or such viatical settlement provider's orviatical settlement broker's authorized representative for the purpose ofdetermining the insured's health status. This contact is limited to once everythree 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 oneyear or less.
(b) A viatical settlement provider shall provide the viator with at least thefollowing disclosures no later than the date the viatical settlement contractis signed by all parties. The disclosures shall be conspicuously displayed inthe viatical settlement contract or in a separate document signed by the viatorand the viatical settlement provider or viatical settlement broker, and containthe following information:
(1) The affiliation, if any, between the viatical settlement provider and theissuer of the insurance policy to be viaticated.
(2) The name, address and telephone number of the viatical settlementprovider.
(3) A viatical settlement broker shall disclose to a prospective viator theamount and method of calculating the broker's compensation. The term"compensation" includes anything of value paid or given to a viaticalsettlement broker for the placement of a policy.
(4) If an insurance policy to be viaticated has been issued as a joint policyor involves family riders or any coverage of a life other than the insuredunder the policy to be viaticated, the viator shall be informed of the possibleloss of coverage on the other lives under the policy and shall be advised toconsult with such viator's insurance producer or the insurer issuing the policyfor advice on the proposed viatical settlement.
(5) State the dollar amount of the current death benefit payable to theviatical settlement provider under the policy or certificate. If known, theviatical settlement provider shall also disclose the availability of anyadditional guaranteed insurance benefits, the dollar amount of any accidentaldeath and dismemberment benefits under the policy or certificate and theviatical settlement provider's interest in those benefits.
(6) State the name, business address and telephone number of the independentthird party escrow agent, and the fact that the viator or owner may inspect orreceive copies of the relevant escrow or trust agreements or documents.
(c) Without limiting the ability of an insurer from assessing theinsurability of a policy applicant and determining whether or not to issue thepolicy, and in addition to other questions an insurance carrier may lawfullyposetoa life insuranceapplicant, insurance carriers may inquire in the application for insurancewhether the proposedowner intends to pay premiums with the assistance of financing from a lenderthat will use thepolicy as collateral to support the financing.
(1) If, as described in paragraph (3) of subsection (o) of K.S.A. 40-5002,and amendments thereto, the loan provides fundswhich can be used for apurpose other than paying for the premiums, costs, and expenses associated withobtaining and maintaining the life insurance policy and loan, the applicationshall berejected as a violation of this act.
(2) If the financing does not violate this section in this manner,the insurance carrier:
(A) May make disclosures, including, but not limited to, such as thefollowing, tothe applicant and the insured, either on the application or an amendment to theapplication to be completed no later than the delivery of the policy:
"If you have entered into a loan arrangement where the policy is used ascollateral, and the policy does change ownership at some point in thefuture in satisfaction of the loan, the following may be true:
(i) A change of ownership could lead to a stranger owning aninterest in theinsured's life;
(ii) a change of ownership could in the future limit your ability topurchase futureinsurance on the insured's life because there is a limit to how much coverageinsurers will issue on one life;
(iii) should there be a change of ownership and you wish to obtainmore insurancecoverage on the insured's life in the future, the insured's higher issue age, achange in health status, or other factors, or both, may reduce the ability toobtaincoverage or may result in significantly higher premiums or both;
(iv) you should consult a professional advisor, since a change in ownershipinsatisfaction of the loan may result in tax consequences to the owner, dependingonthe structure of the loan;" and
(B) may require certifications, such as the following, from the applicantor theinsured or both:
"(i) I have not entered into any agreement or arrangement providingfor the futuresale of this life insurance policy;
(ii) my loan arrangement for this policy provides funds sufficientto pay for someor all of the premiums, costs, and expenses associated with obtaining andmaintaining my life insurance policy, but I have not entered into any agreementbywhich I am to receive consideration in exchange for procuring this policy; and
(iii) the borrower has an insurable interest in the insured."
History: L. 2002, ch. 158, § 8;L. 2008, ch. 96, § 7; July 1.