(a) Application forms for accelerated death benefits shall include a question designed to elicit information as to whether the accelerated death benefit is intended to replace any long-term care insurance presently in force. A supplementary application or other form to be signed by the applicant containing that question may be used.
(b) (1) An insurer, broker, agent, or other person shall not cause a policyholder to replace a long-term care insurance policy unnecessarily. This section shall not be construed to allow an insurer, broker, agent, or other person to cause a policyholder to replace a long-term care insurance policy or life insurance policy subject to this section that will result in a decrease in benefits and an increase in premium.
(2) It shall be presumed that any third or greater policy sold to a policyholder in any 12-month period is unnecessary within the meaning of this section. This section shall not apply to those instances in which a policy is replaced solely for the purpose of consolidating policies with a single insurer.
(c) Upon determining that a sale will involve a replacement of a life insurance policy subject to this section or replacement of a long-term care insurance policy, an insurer or its agent shall furnish the applicant, prior to issuance or delivery of a policy, certificate, rider, or endorsement, a notice regarding replacement of life insurance that includes an accelerated death benefit, or long-term care insurance coverage with a life insurance policy or certificate that contains an accelerated death benefit. One copy of this notice shall be retained by the applicant and an additional copy signed by the applicant shall be retained by the insurer. The required notice shall be provided in the following form:
“NOTICE TO APPLICANT REGARDING REPLACEMENT OF LONG-TERM CARE INSURANCE OR LIFE INSURANCE INCLUDING ACCELERATED DEATH BENEFITS
According to (your application) (information you have furnished), you intend to lapse or otherwise terminate existing life insurance or long-term care insurance and replace it with a life insurance policy with an accelerated death benefit to be issued by (company name) Insurance Company. Your new accelerated death benefit coverage provides 30 days within which you may decide, without cost, whether you desire to keep the coverage. Please note that your underlying life insurance policy may only provide for a 10-day period during which you may decide, without cost, whether you will keep the coverage. For your own information and protection, you should be aware of, and seriously consider, certain factors that may affect the insurance protection available to you under the new coverage.
This accelerated death benefit is NOT Nursing Home, Home Care, or Long-Term Care Insurance, and it is not intended or designed to eliminate your need for that coverage. There are no restrictions or limitations on the use of the accelerated death benefit proceeds.
If you want long-term care insurance, you should consult with an insurance agent licensed to sell that insurance, inquire with the insurance company offering the accelerated death benefits, or visit the California Department of Insurance Internet Web site (www.insurance.ca.gov) that provides information regarding long-term care insurance.
If you want to replace existing coverage with life insurance that includes an accelerated death benefit, you should note the following:
(1) Receipt of accelerated death benefits may be taxable. Prior to electing to buy the accelerated death benefit, policyholders or certificate holders should seek assistance from a qualified tax adviser.
(2) Receipt of accelerated death benefits may affect eligibility for public assistance programs, such as Medi-Cal or Medicaid. Prior to electing to buy the accelerated death benefit, the applicant/buyer should consult with the appropriate social services agency concerning how receipt of accelerated death benefits may affect that eligibility.
You may wish to secure the advice of your present insurer or its agent regarding the proposed replacement of your present coverage. This is not only your right, but it is also in your best interest to make sure you understand all the relevant factors involved in replacing your present coverage.
If, after due consideration, you still wish to terminate your present coverage and replace it with new coverage, be certain to truthfully and completely answer all questions on the application concerning your medical health history. Failure to include all material medical information on an application may provide a basis for the company to deny any future claims and to refund your premium as though your coverage had never been in force. After the application has been completed and before you sign it, reread it carefully to be certain that all the information has been properly recorded.
The above “Notice to Applicant” was delivered to me on:
(Date)
(Applicant’s Signature)”
(d) The replacement notice shall include the following statement except when the replacement coverage is group insurance:
“COMPARISON TO YOUR CURRENT COVERAGE: I have reviewed your current coverage. To the best of my knowledge, the replacement of insurance involved in this transaction materially improves your position for the following reasons:
____ Additional or different benefits
(please specify) ______.
____ No change in benefits, but lower premiums.
____ Fewer benefits and lower premiums.
____ Other (please specify) ______.
(Signature of Agent and Name of Insurer)
(Signature of Applicant)
(Date)
(e) In recommending the purchase or replacement of any policy or certificate issued under this section, an agent shall make reasonable efforts to determine the appropriateness of a recommended purchase or replacement.
(f) The replacing policy or certificate shall not contain a provision establishing a new waiting period in the event existing coverage is converted to, or replaced by, a new or other form within the same insurer, except with respect to an increase in benefits voluntarily selected by the insured individual or group policyholder.
(Added by Stats. 2013, Ch. 345, Sec. 7. (SB 281) Effective January 1, 2014.)
Last modified: October 25, 2018