Filing Life Settlement Forms
Guidance for the Filing of Life Settlement Forms in Accordance with Sections 7806 and 7811 of the Insurance Law
In accordance with section 7806 of the Insurance Law, a licensed life settlement provider may not enter into a life settlement contract unless specimen copies of the life settlement contract form, any amendments or addendums thereto, the application form and the disclosure forms and consumer information booklet required by section 7811(a) and (b) of the Insurance Law, have been submitted to and approved by the Department of Financial Services.
These forms may not be used prior to receipt of approval from the Department. Any changes or modifications to these forms made subsequent to approval must also be submitted to the Department for approval prior to use.
Filings must comply with the following procedural requirements:
- Each form submitted, including the contract form, any amendment forms, application form, disclosure forms and consumer information booklet, must contain a unique identifier set forth in the lower left corner of the first page of the form. The identifier may be made up of numbers or letters or a combination of both. For example: LSC-2020.
- The "Re" or caption of the submission letter must identify the filing as a "Life Settlement Contract Forms" filing.
- Filings must be submitted in duplicate, in writing, to: Peter Dumar, Jr., Chief Insurance Attorney, New York State Department of Financial Services, Life Bureau, Suite 1910, One Commerce Plaza, Albany, New York 12257.
Model Disclosure Forms
Life settlement providers should use the following model forms for their forms submissions or as guidance in drafting their disclosure forms:
- Section 7811(a) (PDF)
- Life Settlement Provider Disclosures to Insured - Section 7811(b) (PDF)
- Life Settlement Broker Disclosures to Policy Owner - Section 7811(c) (PDF)
- Consumer Information - Section 7811(a)(10) - What You Should Know Before Selling Your Life Insurance Policy (PDF)
- Read the original unfinalized 2009 Draft Regulation (PDF)
Use the following as guidance when preparing forms. Note that:
- The Life Settlement Contract Forms Filing section contains several requirements for life settlement contract forms and life settlement application forms.
- The Disclosure section contains the minimum requirements for the consumer information booklet. If a life settlement provider chooses not to use the model booklet, they should use the Disclosure section below as guidance in preparing the booklet.
Filing Life Settlement Contract Forms with DFS
A life settlement provider shall file with and receive approval from the Superintendent of Financial Services for every life settlement contract form, application form and the disclosure forms required by the Insurance Law prior to use in New York state.
A life settlement provider shall file with and receive approval from the Superintendent for a consumer information booklet required under section 7811(a)(10) of the Insurance Law prior to use in this state unless the model consumer information booklet is used to comply with section 7811(a)(10), in which case filing with the superintendent is not required.
Every life settlement contract shall include the following provisions:
- the provision required by section 7813(g)(1) of the Insurance Law pertaining to the owner’s right of rescission;
- a provision stating that failure to tender the life settlement contract proceeds to the owner by the date disclosed to the owner shall render the life settlement contract voidable by the owner for lack of consideration until the time the proceeds are tendered to and accepted by the owner;
- a provision that the contract together with the application therefore shall constitute the entire contract between the parties; and
- if the life settlement provider has agreed to continue any supplemental benefits under the life insurance policy, a provision setting forth the terms upon which such benefits will be continued.
The application for the life settlement contract shall:
- set forth a prominently displayed notice, or similar language, as follows:
"Receipt of payment pursuant to a life settlement contract may affect eligibility for public assistance programs such as Medicaid, supplementary social security income, food stamps or other governmental benefits or entitlements. Receipt of payment pursuant to a life settlement contract may be taxable. Prior to applying for a life settlement contract, a life insurance policy owner should consult with the appropriate social services agency concerning how receipt of life settlement proceeds will affect the eligibility of the recipient and the recipient's spouse or dependents, and with a qualified tax advisor";
- provide for an acknowledgement of receipt of the consumer information booklet;
- include in any statement to be signed by the applicant as to the truthfulness, correctness and/or completeness of the information in the application, a statement that the truthfulness, correctness and/or completeness is to the best of the applicant’s knowledge and belief;
- if the application is required to be witnessed, then it shall be witnessed by a person who does not have a financial or beneficial interest, directly or indirectly, in the life settlement transaction; and
- contain the following statement:
“Any person who knowingly and with intent to defraud any life settlement provider or other person files an application for a life settlement contract or statement of claim containing any materially false information, or conceals for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent life settlement act, which is a crime, and shall also be subject to a civil penalty not to exceed five thousand dollars and the stated value of the claim for each such violation.”
The warning statement shall be placed immediately above the space provided for the signature of the person executing the application and shall be printed in type which will produce a warning statement of conspicuous size.
All claim forms for life settlements provided to any person in connection with a life settlement transaction shall contain the statement and shall be in the format as set forth above.
Disclosure (Consumer Information Booklet)
The life settlement provider or life settlement broker shall deliver a consumer information booklet to every applicant before the application for the life settlement contract is completed, and receipt of the consumer information booklet must be acknowledged by the applicant in the application form.
The consumer information booklet shall, at a minimum, include the following information:
- how life settlements operate;
- that offers should be obtained from several life settlement providers to make sure that the applicant has a competitive offer;
- that if a life settlement broker is used in conjunction with effecting a life settlement contract, the life settlement broker is required to disclose to the owner the amount of compensation to be paid to the life settlement broker by no later than the date the life settlement contract is signed;
- possible alternatives to life settlements, including loans secured by the cash value of the life insurance policy, withdrawing some of the cash value and reducing the death benefit of the policy to lower future premiums. If the insured under the policy is terminally or chronically ill, the owner of the policy may be able to accelerate some or all of the death benefit during the lifetime of the insured if the policy provides an accelerated death benefit, together with a statement that the owner should seek advice from an insurance agent or other professional before using the cash value of the policy;
- that tax consequences may result from entering into a life settlement contract and that the applicant should consult with a qualified tax advisor;
- that the receipt of life settlement proceeds may affect eligibility for public assistance programs such as Medicaid, supplementary social security income, food stamps or other governmental benefits or entitlements and that the owner should consult the appropriate agency for more information;
- that the owner has the right to rescind a life settlement contract from the time of execution of the contract until 15 days after receipt of the proceeds;
- that the proceeds payable to the owner may not be exempt from the owner's creditors, personal representatives, trustees in bankruptcy and receivers in state and federal courts;
- that the insured’s medical, financial or other personal information may be disclosed to certain other parties if the insured has provided written consent;
- that the life settlement provider or its authorized representative may contact the insured within a certain specified frequency for the purpose of determining the insured’s health status;
- that, after a life settlement provider buys a life insurance policy, the policy may be resold to other parties;
- that if the owner is asked by another person to buy a life insurance policy or if the owner plans to buy a life insurance policy with a primary purpose of selling it to another person, then this transaction may be a stranger-originated life insurance (STOLI) transaction that is prohibited by the New York Insurance Law;
- that the owner should consult a professional financial advisor, attorney or accountant to help the owner decide if a life settlement is the most suitable arrangement for the owner; and
- that for additional information about life settlements generally or about a life settlement provider, life settlement broker or life settlement intermediary, the owner may contact the New York State Department of Financial Services.
For questions about this guidance, please contact James Hulme, Associate Insurance Attorney, Life Bureau at (518) 486-5258 or by email: James Hulme.