(a) Without limiting the ability of an insurer to assess the insurability of a policy applicant and in addition to other questions an insurance company may lawfully pose to a life insurance applicant, an insurance company may inquire in the application for life 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.

Terms Used In Connecticut General Statutes 38a-465h

  • Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
  • Insurance: means any agreement to pay a sum of money, provide services or any other thing of value on the happening of a particular event or contingency or to provide indemnity for loss in respect to a specified subject by specified perils in return for a consideration. See Connecticut General Statutes 38a-1
  • insurance company: includes any person or combination of persons doing any kind or form of insurance business other than a fraternal benefit society, and shall include a receiver of any insurer when the context reasonably permits. See Connecticut General Statutes 38a-1
  • Insured: means a person to whom or for whose benefit an insurer makes a promise in an insurance policy. See Connecticut General Statutes 38a-1
  • Life insurance: means insurance on human lives and insurances pertaining to or connected with human life. See Connecticut General Statutes 38a-1
  • Policy: means any document, including attached endorsements and riders, purporting to be an enforceable contract, which memorializes in writing some or all of the terms of an insurance contract. See Connecticut General Statutes 38a-1

(b) If, as described in subdivision (11) of § 38a-465, 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 life insurance policy and loan, the application shall be rejected as a violation of § 38a-465i.

(c) If the financing does not violate § 38a-465i in this manner, the insurance company:

(1) May make disclosures including, but not limited to, the following, to the applicant and the insured, in the application or an amendment to the application completed not later than the delivery of the policy: “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: (A) A change of ownership could lead to a stranger owning an interest in the insured’s life; (B) a change of ownership could 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; (C) 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 or other factors may reduce the ability to obtain coverage or may result in significantly higher premiums; and (D) 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 the applicant or the insured to certify that:

(A) Such applicant or insured has not entered into any agreement or arrangement providing for the future sale of such life insurance policy;

(B) The loan arrangement for this policy provides funds sufficient to pay for partial or full payment of the premiums, costs and expenses associated with obtaining and maintaining such life insurance policy, and that such applicant or insured has not entered into any agreement by which such applicant or insured will receive consideration in exchange for procuring such policy; and

(C) The borrower has an insurable interest in the insured.

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