First it was passed in Washington State. Oregon and Maine soon followed with similar laws and now more states are in the process of following their lead. The law that started out small but is now growing fast is the Life Insurance Consumer Disclosure Law and now the National Conference of Insurance Legislators (NCOIL) is drafting a model law for every state legislature in the country. It will require that life insurance companies inform policy owners that they have numerous alternative means to extract value from their policy at the time they are considering allowing it to lapse or surrendering it for any remaining cash value.
The insurance commissioners and law makers in those states recognized the valuable opportunity a life settlement and other options might offer as an alternative to lapsing or surrendering a policy. They did not want to see impediments to their citizen’s ability to access the secondary market to realize the maximum value of a life insurance policy. So these states passed laws mandating that it is the responsibility of the insurance company to inform their policy holders at the time of a lapse or surrender of the existence of alternatives.
Life Care Funding Group testified this summer before NCOIL about the importance of giving seniors and their families as much information as possible about their legal rights and options. Many of the families helped by Life Care Funding Group have a need to pay for expensive long term care services, and the committee recognized the importance of using an asset that otherwise would be discarded to cover these costs.
“We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors”, testified Chris Orestis, president of Life Care Funding Group. “When a senior and their family is informed that an asset (life insurance policy) they are about to throw away has unrealized value for them, and it is a potential solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid”, concluded Orestis before the NCOIL committee.
In an official statement issued on July 12th, Georgia State Sen. Ralph Hudgens reported to NCOIL’s executive committee that he was asking Kentucky Rep. Ron Crimm to craft a life insurance options model bill in the next few weeks by melding similar laws that already have passed in Maine, Washington and Kentucky. Hudgens said he expects the model act will be taken up at NCOIL’s November meeting in Austin and adopted.
The model would actually take the disclosure requirements to the next level by specifying numerous alternatives to lapsing or surrendering a policy. The option for a life settlement would be one of as many as a dozen choices a policy owner could consider. Options such as converting a policy’s death benefit to a long term care benefit, annuities, loans and accelerated death benefits would also be part of the mandated disclosure.
To read more about NCOIL’s Disclosure Law and Bill of Rights, click here: http://www.theinsurancebellwether.com/2010/08/ncoil-seeking-comment-on-beneficiaries.html