Accelerated Death Benefits may not be sold or marketed as health, accident or long-term care insurance. An accelerated death benefit shall not reimburse or provide coverage for any specific health, accident or long-term care benefit
An Accelerated Death Benefit is a provision, endorsement or a rider added to a life insurance policy that provides for the advance payment of any part of death proceeds of that life insurance policy
A Qualifying Event means that an insured has a medical condition that would in the absence of treatment result in death within a limited period of time, not to be restricted to a period of less than 6 months
SB281 Section 10295 (a) (b) (1) (2) (A)
For Policies Intended to Be Federally Tax Qualified
Insurer shall require a licensed health care practitioner, independent of the insurer certifies that the insured meets the definitions of “chronically ill individual”
If the licensed health care practitioner determines the insured does not meet the definition the insured is entitled to a second opinion
Certification is to be done in a timely manner so as not to impede the insured’s ability to gain benefits and shall be renewed every 12 months
No cost shall come from the insured’s insurance proceeds for the certification
In order to be considered an “independent of the insurer” the licensed practitioner shall not be an employee of the insurer and shall not be compensated in any manner linked to the outcome of the certification
SB281 10295 (B) (ii) (1) (II) (III) (IV) (V) (VI)
Applicant defined as:
In the case of an individual life insurance policy with an accelerated death benefit the person who seeks to contract for benefits
In the case of a group life insurance policy with an accelerate death benefit the proposed certificate holder
Certificate defined as:
Means any certificate issued under a group life insurance policy that includes an accelerated death benefit
Supplemental Benefit defined as:
A rider on a life insurance policy previously defined
A chronic illness/critical illness rider that accelerates death benefits shall not be considered an accelerated death benefit.
Points to Remember with Accelerated Death Benefits (ADB)
The ADB is fixed at the time it is paid out.
The ADB is not conditional on the receipt of LTC services, this is an acceleration of the death benefit of a life insurance contract.
Insured may take the ADB in a lump sum or periodic payments on a qualifying event.
The ADB is due immediately upon a qualifying event and the insurer can not restrict how the funds are spent.
The insurer must obtain written instructions as to how the ADB is paid out unless they are the assigned irrevocable beneficiary.
If any death benefit remains, it is not affected by the ADB.
The maximum amount to be accelerated must be disclosed.
Explanation that the insured may accelerate the DB more than once on a qualifying event up to the maximum.
A statement that the “supplemental benefit” may have tax consequences.
The ADB may not have any pre-existing conditions or prior hospitalization requirements attached to qualifying for payment.
All costs, fees and any other pertinent payment internally in the contract for the ADB must be disclosed.
All tax ramifications under IRC Section 101(g) must be disclosed.
SB281 10295.1 (b) (1) (2) (3) (4) (c) (d) (e) (f)(1) (2)
Commissioner’s & Insurer Responsibilities
The insurance commissioner must approve all language.
The term “Accelerated Death Benefit” must be included in filed language.
All forms must be submitted and approved.
Underwriting, age restrictions and whether the ADB is for new issues or in force business or both must be approved
The following written disclosure must be attached to the policy form and provided to the consumer either by an agent soliciting the sale, solicitation by “direct response methods” or a group sale.
SB281 10295.2 (a) (b) (c) 10295.3 (c) (d) (e)
Notice to Applicant/Buyer
IMPORTANT NOTICE TO APPLICANT/BUYER REGARDING ACCELERATED DEATH BENEFITS
“The benefits provided by this accelerated death benefit are not intended to provide, and will never provide, long-term care insurance nursing home insurance, or home care insurance. If you are interested in long-term care or nursing home or home 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) section regarding long-term care insurance.
If you choose to accelerate a portion of your death benefit, doing so will reduce the amount that your beneficiary will receive upon your death. Receipt of the accelerated death benefits may be taxable. Prior to electing buy the accelerated death benefit, you should seek assistance from a qualified tax advisor. 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, you should consult with the appropriate social services agency concerning how receipt of accelerated death benefits may affect that eligibility.”
SB281 10295.3 (b)