[§431E-32]  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.



(b)  If, as described in subsection (a)(3) of
the definition of "life settlement contract" in section 431E-2, 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
policy and loan, the application shall be rejected as a violation of the
prohibited practices in section 431E-41.



(c)  If the financing does not violate section 431E-41
in this manner, the insurance carrier:



(1)  May make disclosures 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, including the following:



 



"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:



(1) A change of ownership could lead to a
stranger owning an interest in the insured's life;



(2) 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;



(3) 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;



(4) 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



 



(2)  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."



[L 2008, c 177, pt of §1]